Re: Why are oil prices so high?


"The Cheesehusker, Trade Warrior" <Iamtj4life@xxxxxxxxx> wrote in message news:1194035669.524562.113160@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
On Nov 2, 3:26 pm, Jon Enslin <jens...@xxxxxxxxxxx> wrote:
On Nov 1, 6:43 pm, "The Cheesehusker, Trade Warrior"





<Iamtj4l...@xxxxxxxxx> wrote:
> On Nov 1, 5:25 pm, "The Cheesehusker, Trade Warrior"

> <Iamtj4l...@xxxxxxxxx> wrote:
> > On Nov 1, 4:31 pm, Dan Bretta <nuda...@xxxxxxxxx> wrote:

> > > Oil was at $10/barrel in November of 1998 and less than 10 years > > > later
> > > we're at $96. It was at $17/barrel two months after the 9/11 > > > attacks.

> > > I know there are bigbranes in this group that follow that type of
> > > stuff so what's the reason?

> > > Dan

> > Supply/demand on a global basis, sky high freight rates, fall of the
> > dollar, war premium and b/c people will pay (part of S/D)

> > A couple interesting aspects of this, is that unleaded prices have
> > stayed fairly stable recently - Mexico is reducing production by 600k
> > per day b/c of excessive supply/refining glut in the US

> Another factor I neglected to mention - "long" investment. There's
> been a huge influx of monies into the commodity markets over the past
> 10 years - I'm talking indexed investment monies here - as in going
> from essentially 0 to a guesstimated $150 billion next year. The key
> point here, is that this indexed money is *always* long - just like
> with a SPDR - and buying begets returns begets more index investment,
> etc.

> Why this matters is that this is a huge amount of constant long
> position in these markets - and given the leverage ratios of
> commodities, represents huge percentages of overall market worth.

> Which means, according to some folks, that $20-30$ of the current
> futures price is due to the long investments only.

I have no idea what this means, but you must be right.

Jon- Hide quoted text -

- Show quoted text -

Think of it in terms of supply/demand for *price*.....if the price of
something is in demand, it'll rise accordingly.

The fun part, is that the rise itself, creates demand as that is seen
as return - self-fullfilling mechanism.

Which was seen in the run-up of prices in tech companies circa 97-01 and the housing market circa 01-05.

brink

.

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