WTI Apr11.pngCrude oil has been a speculators’ paradise for the past 9 months. Central banks have been making large amounts of cash available at 0% interest. In turn, this has funded larger and larger speculative positions in financial and commodity markets.

CME, the world’s largest derivatives market, saw volume up 31% in March vs 2010.

The chart above, from Petromatrix, highlights the problem. It shows net NYMEX length for the Large Speculator category in WTI crude oil futures:

• Since last August, when the Fed first announced QE2, the Speculators built net length of 200kbbls by December (light blue line)
• This year, they have increased this position by over 25% (green line)
• Their net length is now 250% higher than last April, and 500% larger than in 2008 – when the market was heading towards its $147/bbl peak

We are, of course, getting close to the start of the US driving season at the end of May. And already gasoline prices are approaching the $4/gal level, which has proved politically very sensitive in the past. This week, they will reach $3.77/gal nationally, and $4/gal in California.

In Europe, prices are already higher than in 2008, due to Brent’s premium over WTI and currency weakness. The blog’s local garage has been open 31 years, but may well now close as the working capital needs have become so large. One tanker of gasoline now costs it £250k ($400k).

Yet as noted many times in the blog, global inventories remain near record levels.

Petromatrix raise the key question – will today’s high prices lead politicians to start asking questions about the value of all this speculative activity? If they do, we might discover some interesting answers.

PREVIOUS POST

Tokyo queues for torches, not iPads

05/04/2011

Sadly, we still seem no closer to a solution to Japan’s nuclear nightmare ...

Learn more
NEXT POST

$25bn M&A surge suggests market top is close

07/04/2011

Financial markets are different from other markets. And the way we relate to the...

Learn more
More posts
G7 births hit new record low, below Depression level in 1933
14/07/2019

If a country doesn’t have any babies, then in time it won’t have an economy. But that...

Read
From subprime to stimulus…and now social division
06/07/2019

The blog has now been running for 12 years since the first post was written from Thailand at the end...

Read
Resilience amidst headwinds is key for H2
30/06/2019

Resilience is set to become the key issue as we look forward to H2, as I note in a new analysis for ...

Read
Perennials set to defeat Fed’s attempt to maintain the stock market rally as deflation looms
23/06/2019

Never let reality get in the way of a good theory. That’s been the policy of western central b...

Read
Europe’s auto sector suffers as Dieselgate and China’s downturn hit sales
16/06/2019

Trade wars, Dieselgate and recession risk are having a major impact on the European auto industry, a...

Read
2019 Global Outlook – a mid-year update: ACS webinar on Thursday
04/06/2019

There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and t...

Read
Recession risk rises as Iran tensions and US-China trade war build
26/05/2019

Oil markets are once again uneasily balanced between two completely different outcomes – and o...

Read
Smartphone market decline begins to impact global stock markets
19/05/2019

The bad news continues for the world’s smartphone manufacturers and their suppliers.  And Pre...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more