Excluding options and the over-the-counter market trading, a top energy analyst we follow recently computed that the volume of trading for “financial oil” was 20-times the volume for physical oil on a global basis. Given the murky data from which even he must work, it is safe to say that the number at which he arrived is no doubt a severe understatement….
The analyst had taken a look at the size of the trading in financial oil versus the physical market for oil to understand the conundrum of falling prices for energy, and his data showing that the global supply and demand for oil was in rough balance. According to his numbers oil supplies are tight on a global basis, and that global demand has been growing and projected to do so next year by 1-2%. His conclusion was that the recent severe decline in the price of oil was due to a reduced demand for financial oil that had little to do with the current physical market.
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