ZB, you do need to match buyers with seller… thats how a market works. Lets say a consumer of oil wants to hedge at $38/ barrel but the producer had a more bullish opionion on the fundamentals so they are like, no… I’ll do $42. You have two opionins on fundamentals and no trade happening. Speculators come in, like red blood cells, and give the volume to the market so all opinions on the fundamentals are able to be priced in. (try to find that in the CFA text, BS They tansport the price from here to there and back again. I don’t know why you think speculators and hedgers aren’t playing the same game. They are both having an opionion on the fundamentals and then trying to get on the right side of things. Even for technical traders, the fundamentals are the bottom line. Technical analysis, after all, is a way of measuring people’s sentiment. Sentiment is a product of fundamentals. Exhuberant sentiment is a signal of digression away from intensic value… which is why speculators will do you a favor and fade it.
Why did oil go from $28 (actually it was $26) to $40??? I was there watching at the exact turnaround. Here is what happened. The entire game changed. The plummet in oil was exaggerated by the prospect that OPEC would not cut production until the shale business was out of business. At the exact molment before oil turned around OPEC released a statement saying they were considering cutting production… no more game of chicken… oversuppy end in sight. HOWEVER, there was a caveot with that statement that eveyone seem to be igoring. They are only cutting if everyone agrees to it. Iran will not. Once this sinks in, say bye to oil again! As you can see… the environment is very confusing and political.
Too funny. Ralph Nader might be behind some of these screen names. Commodities experienced huge and immediate price swings long before forwards and futures. The very reason forwards were invented and traded in fact. Argument over. Thread closed.
ultimatly the major capex cuts major oil compaines are making now will lower supply in the future to the point where i blieve prices will at least be above $50 per barrel
It was indeed a popcorn event! Futures got gutted at the open. However, the experience has left me sour. My new trading system (which I started implimenting last week) told me to go long at 39.22. I got scared with all the hype and did not take it. Now my profit target has been passed so I missed one of my “wins”… First rule of systems trading. … ALWAYS FOLLOW THE DANG SYSTEM.
Exactly! Even if I had taken the trade at 39.22 and it ended up taking another dive, I would have called it a “good trade” since it was placed under principles that I trust to, overall, give me the return I want. Meanwhile, I just need to grow a pair (or whatever the female equivalent is)
The price seems to be based on fundamentals right now, hence no shock. The smart people don’t care if Saudi freezes production: we know that OPEC ex-Iran can’t really add more barrels right now anyway. I wouldn’t be surprised if we are in a supply shortfall right now if Kuwait can’t get their barrels back online. If that drags on much longer, we could be at $50 in short order even with no deal.
And WTI nears $40 again. All the MLP stocks are up. I wonder if this is due to market ignoring Doha or paying more attention to Kuwait strike. In either case, I say earlier in the year was the bottom. Not that I’m betting on oil prices, I’m bought midstream firms last month with high yields and good distribution coverage.
They tansport the price from here to there and back again. I don’t know why you think speculators and hedgers aren’t playing the same game. They are both having an opionion on the fundamentals and then trying to get on the right side of things. Even for technical traders, the fundamentals are the bottom line. Technical analysis, after all, is a way of measuring people’s sentiment. Sentiment is a product of fundamentals. Exhuberant sentiment is a signal of digression away from intensic value… which is why speculators will do you a favor and fade it.
First rule of systems trading. … ALWAYS FOLLOW THE DANG SYSTEM.