"More buyers than sellers," is often the answer traders give when asked why prices of shares, bonds or commodities are high.
For oil, this seems to be one explanation why the market has risen to record levels near $140 a barrel and stayed there, says Marco Dunand, chief executive of oil trading firm Mercuria.
"We've noticed in the last few months, it is more and more difficult to find people willing to sell the market," he told Reuters in an interview. "It's a kind of liquidity crisis."
Dunand, with partner Daniel Jaeggi, has helped turn Mercuria into one of the world's top 5 independent energy traders with turnover last year of $33 billion.
The company, created in 2004, is active around the globe trading crude oil and products.
It has just signed a deal as part of a consortium to buy a refinery in Albania.
It is about to start natural gas trading in North America and aims to expand refined products into the U.S.
The firm's main office is in Geneva in Place du Molard, which has longstanding links with commodities trading as it was the city's commercial hub in medieval times.
Dunand, who has been trading oil for two decades, says record prices have changed the shape of the market.
The natural sellers, such as oil producers which traditionally hedge production by selling futures contracts, are no longer there, partly because of huge margin calls.
The margin payments, a kind of deposit required to trade futures, are now around $10 to $20 a barrel.
"That was the price of a real barrel of oil not so long ago," says Dunand.
Oil has doubled in price in the past year and risen about 40 percent since the start of this year.
The advance partly reflects expectations that global supply may not keep pace with strong demand growth from newly industrializing China, India and the Middle East.
High fuel costs have already caused protests from consumers in the United States, Europe and Asia.
Politicians are under pressure to find a solution.
"It's not surprising that citizens of the world are feeling a bit upset because of how much it costs to drive their cars," said Dunand. "It's clearly a temptation to try to find the culprits."
For some, these are speculators, which could be investment banks, hedge funds, pension funds or retail investors, who can now buy investment products that mimic oil futures or indexes.
Mom and Pop Investors
"The nature of the investor has changed," said Daniel Jaeggi, vice president and head of global trading. "Mom and pop can be punting oil now and that's different from a few years ago."
Dunand points the finger at pension funds for creating a structural problem.
Pension funds have begun investing in oil and other commodities over the past 6 years because they behave differently from stocks and bonds and offer diversification.
An estimated $200 billion-plus is invested in investment indexes which track commodities, including oil.
"If pension funds want to invest 3 to 4 percent in commodities, the size of the commodity market at the moment is not enough to provide the liquidity to sell against this wall of buying," said Dunand.
But he also said it would be "undemocratic" to make commodities off-limits to pension plans.
The investment logic for moving into commodities is compelling, according to Jaeggi.
A hundred dollars invested the U.S. S&P 500 index on January 1, 2000 would have delivered a negative return.
The same $100 invested in commodities would made a return of 350 percent.
"If you had diversified you would have done a financially prudent thing - so does that make you a speculator?" he said.
The market's fundamentals have also played a part.
"Global commercial stocks were depleted over the last 12 months," said Jaeggi, who sees the reasons behind oil's rise as part inflow of investment money and part supply/demand.
The market needs a bigger cushion of oil in storage to ease concerns over potential supply disruptions.
"If OPEC is serious about trying to dampen the price rally we have seen, they have to accept the fact they need to produce a bit more oil," said Dunand, who said this would help although not entirely resolve the situation.
Goldman Sachs , Morgan Stanley and other market players have predicted oil could go to $150-$200 a barrel.
Dunand and Jaeggi are not willing to make predictions.
"What is the right price of oil? - I have no idea, but I can tell you one damn thing for sure, on December 31, 1999 oil was 10 bucks a barrel and that was too cheap," Jaeggi said.
