- How Many US Consumers Will Shop this Weekend?
- Tuesday's Heavy Dose of Data to Dictate 'Risk' Behavior
- World's Largest Share Issue Priced at Deep Discount
- Obama says Boosting US Jobs is Top Priority
- Why the Dollar Will Likely Stay Weak for Some Time
- Playboy to Outsource Most Magazine Operations: Report
- General Motors to Cut up to 9,500 Jobs in Europe
- EU Drops Proceedings Against Qualcomm
- Appeals Court Denies Microsoft's Alcatel Petition
- Can Murdoch Help Bing Challenge Google and Shift the Content Equation?
- HP's Mark Hurd
- HP Comes in As Expected; Is It Time to Buy?
- 9 Stocks That Play Rising Water Costs: Strategists
- Weis' Deal Likely Won't Change Big Money Contracts
- Gold Prices Can Double in 3 Years: Portfolio Manager
- Nov. 23: Unusual Volume Leaders
- Help Wanted—Please Run $4 Billion University
- Apple Comes to AT&T's Rescue
MOST SHARED
- The 'Real' Jobless Rate: 17.5% Of Workers Are Unemployed
- Why Amazon Rules Retail
- Wave of Debt Payments Facing US Government
- China Eastern to Complete Shanghai Air Buy by End '09
- JAL Slides to Record Low on Bankruptcy Jitters
- Prepare For Large Decline In Stocks, Next Year?
- Gold Will Collapse Like Oil Did in 2008: Charts
- The Social Media Gaming Threat
- Paul: Audit the Fed
- Nielsen Ratings Coming to Video Games
Text Size 
France and Britain are calling for governments to clamp down on oil market manipulation, the Commodities Futures Trading Commission is considering imposing position limits and CNBC's Jim Cramer has railed on the oil futures market, calling it a farce. This is an issue that traders have also been concerned about for at least two years.
Betting on oil price moves has always been a speculative game; the difference now is the amount of money that's rushed into this market not from traditional hedgers who rely on this commodity for their business but investment firms who are simply hedging risk with another asset class. These "speculators" have put a lot of money to work in the oil market in the last few years.
For the most part these "speculators" don't include the independent floor traders or traders who work for the smaller brokerages. (Some of them wish they could have enough money to be in that group.)
Many of the floor traders like to blame the advent of electronic trading for oil price volatility — but that's just the trading tool used by the bigger forces at work. Really it's the growth of commodity index funds and exchange traded funds that's crushing traditional hedgers and smaller traders — and the money invested in these funds is causing these wild price swings.
 |
CNBC.com |
The Wall Street Journal reports today that $300 billion was invested in commodities indices last year as oil soared to $147/barrel. As oil prices [US@CL.1 Loading... ()] sank to $33/barrel earlier this year, Bank of America Merrill Lynch says investments in commodities indices fell to $80 billion in February — but swelled to $125 billion by June as oil price rose over $70.
Analyzing these price moves is really about following the money — including money that's on margin and over leveraged. A closer look at the issue from the CFTC and other governments may pressure oil prices in the short-run but if tighter regulations aren't actually put into place, these insane prices moves in the oil market are likely to continue.
Print
Email
- A diet high in fat and sugar might actually be good for your portfolio.
- Warren Buffett and Bill Gates discuss the economy and other subjects with CNBC's Becky Quick.
- From the AIG&T to the Merrill Lychee, Jane Wells lists this year's fashionable holiday cocktails.
- One shopper explains why – aside from the prices – he gets up at 3am on the day after Thanksgiving to go shopping every year.
- Congressman Ron Paul explains to Squawk Box why he’s pushing legislation to audit the Federal Reserve.
- …you'll want to be prepared. Tips for getting the most out of the post-Thanksgiving shopping frenzy.
Data is a real-time snapshot *Data is delayed at least 15 minutes