"Beyond that, say traders, oil price direction is largely in the hands of the big investment funds, mostly U.S. based, who have taken oil markets by storm this year. "
DTB oil trades just like any other commodity, I do not believe with the above quote though.
for instance some people believe that if there less trouble in many oil producing regions oil would be trading for around $35. up to a $5 premium is because hedge funds are pushing the prices up (should say bidding them up).
hedge funds, investors, specualtors
there was some attacks on western oil workers and interests in Saudia Arabia, after these attacks oil went higher. it is hard to short a commodity when there could be trouble problems in a major producer.
where I disagree with the quotes is I do not believe "oil price direction is largely in the hands of the big investment funds, mostly U.S. based, who have taken oil markets by storm this year. "
me and you can speculate on what a certain commodity does however we cannot control the price. I mean if hedge funds stop going long and go short the price will not fall to $20 a barrel.
such specualation may add a few dollars to the price but they do not control it.
could go into my history of trading futures (most worked out/except for coffee) that was a disaster. but these are hard to play and no hedge fund can control the moves all the time.
here are some reasons for the price of oil, as for specualtion from hedge funds only a small amount can be attibuted to that.
1. supply demand. the worldwide and US economy are doing much better more demand.
2. supply. there is a big question of how much supply we have, there is a feeling that we can find plenty more. Really someone can list major finds. I will list projects that have been disappointing because of the small amount of oil. larger elephants finds are much harder to find.
also many new areas of exploration require higher oil prices $30 + to take the risk. You are not drilling in the north or offshore Canada east coast for $20-$25 oil, to make a 13%+ or even dream of that you need $30+
3. I know everyone wants to blame OPEC and most US politiceans do however when was the last time a refinery was built....1980s?
4. just compare to how much refinery capacity has increased during that time and how much fuel demand has gone up.
5. to build a refinery would take more than $100-$250 million just for the planning and the enivornmental restrictions. not to mention local, state, federal laws. which could stop it at any time.
why invest $250 million on a longshot. would also require around 2-3 billion to build one. believe none are being planned or built at present.
6. OPEC is producing roughly 23.5-24 millionbarrels a day, and are producing 2million over this at present.
they may be able to produce 2 million more however not much more than that.
7. trouble in oil producing regions. Sauia Arabia is a prime example. more problems with the government and terrorists attacks probably will continue.
you could long and if a terrorist attack happens in Saudia Arabia then then price pushes higher.
I believe the price of oil will fall to around $35, however long term very bullish on oil and natural gas.
hoping for a pullback to $35 or more and then start looking at Jr. oil/gas companies. These companies can sell off sharply and be forgotten quickly.
thanks
selkirk
