I reckon that we are seeing a similar occurrence in the oil futures market as we have in the gold futures market...
Basically what we are getting is massive amounts of liquidity moving into the commodities/futures (paper trading) markets, from what I gather is the result of largish players such as hedgefunds getting in on the act.
As a result volumes traded are far beyond what actually exists in the real world and what results is some massive moves, and extra volatility like never seen before.
I was reading an article recently about this phenomenon but I am darned if I can find it... never mind...
The effect that we see is a dislocation between "real" commodity prices and futures based commodity prices.
I know nothing about the price of physical oil but I do know a little about the price of physical gold
(If you need to know, I have been dealing in precious metals as the son of jewellers (amongst other things my parents were extremely multitalented, god rest their souls) and have been the associate of artisans for over thirty years,looking like I do sometimes gets me into "security" based roles when purchasing and carrying the stuff about).
Currently there is quite a substantial premium in physical gold to the future based spot price. A quick glance at the gold threads here on HC will show you the fruror that creates.
So, what I am saying is, I do actually reckon there is quite a possibility that Futures based oil, paper oil if you will, will got to around the $25 mark...(I actually have a price of $21.40 based on t/a stuff) assuming the futures markets stay liquid... whether anyone can actually purchase "real" oil at this price is a different question altogether.
