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If there was lots of oil sitting around in warehouses from people speculating on the price of it (or for another reason), I'd expect we'd hear about that in the

by cturner 16y ago

If there was lots of oil sitting around in warehouses from people speculating on the price of it (or for another reason), I'd expect we'd hear about that in the news. We've been hearing this about copper being stockpiled in China recently. In this case it seems to be not for speculation but due to a loophole in bank lending rules.

cabalamat 16y ago
> If there was lots of oil sitting around in warehouses from people speculating on the price of it Maybe the oil was sitting in underground reservoirs? (i.e. people were extracting it more slowly)
- dhruval 16y ago
  Haha. Yes, OPEC is basically a 40 year old global oil price fixing conspiracy.
  - deleted 16y ago
    [deleted]
praptak 16y ago
> If there was lots of oil sitting around in warehouses from people speculating on the price of it People who speculate on commodities do not actually have to physically keep them. The commodities just change ownership, but not location. Only the final buyer actually picks them up.
- yardie 16y ago
  Sometimes they do change location, and you end up with 28,000 tons of coal on your front door. http://thedailywtf.com/Articles/Special-Delivery.aspx http://thedailywtf.com/Articles/Special-Delivery.aspx
  - praptak 16y ago
    Heh, heh, good article. In addition to the humorous value it actually does explain why traders do not (usually! ;-) ) need warehouses.
- cturner 16y ago
  Thanks. Hence my point that it's not turtles all the way down. Eventually there has to be some real demand to support a high price, or else the price will drop as traders trade away to avoid delivery.
  - praptak 16y ago
    > Eventually there has to be some real demand to support a high price Yes, of course. That's why the bubbles burst. But before that, there's a ton of money on top of the real demand, invested only in hope that more people will invest more money in hope that more people will invest... so it goes until there are no more people willing to invest. > or else the price will drop as traders trade away to avoid delivery. The delivery is not the limiting factor. The traders just roll forward their contracts long before the actual delivery date.
tomotomo 16y ago
Actually, oil traders did store millions and millions of barrels of oil in super tankers in the sea. This was after the recent collapse in oil prices, when the futures price was higher than the immediate price. Without any risk, they could hold onto oil for a year and know they could sell it at a higher price.

by cturner 16y ago

cabalamat 16y ago

> If there was lots of oil sitting around in warehouses from people speculating on the price of it Maybe the oil was sitting in underground reservoirs? (i.e. people were extracting it more slowly)

dhruval 16y ago
Haha. Yes, OPEC is basically a 40 year old global oil price fixing conspiracy.
- deleted 16y ago
  [deleted]

praptak 16y ago

> If there was lots of oil sitting around in warehouses from people speculating on the price of it People who speculate on commodities do not actually have to physically keep them. The commodities just change ownership, but not location. Only the final buyer actually picks them up.

yardie 16y ago
Sometimes they do change location, and you end up with 28,000 tons of coal on your front door. http://thedailywtf.com/Articles/Special-Delivery.aspx http://thedailywtf.com/Articles/Special-Delivery.aspx
- praptak 16y ago
  Heh, heh, good article. In addition to the humorous value it actually does explain why traders do not (usually! ;-) ) need warehouses.
cturner 16y ago
Thanks. Hence my point that it's not turtles all the way down. Eventually there has to be some real demand to support a high price, or else the price will drop as traders trade away to avoid delivery.
- praptak 16y ago
  > Eventually there has to be some real demand to support a high price Yes, of course. That's why the bubbles burst. But before that, there's a ton of money on top of the real demand, invested only in hope that more people will invest more money in hope that more people will invest... so it goes until there are no more people willing to invest. > or else the price will drop as traders trade away to avoid delivery. The delivery is not the limiting factor. The traders just roll forward their contracts long before the actual delivery date.

tomotomo 16y ago

Actually, oil traders did store millions and millions of barrels of oil in super tankers in the sea. This was after the recent collapse in oil prices, when the futures price was higher than the immediate price. Without any risk, they could hold onto oil for a year and know they could sell it at a higher price.