HIS typical trade, one Home Counties-based investor tells me, would be “10 lots”. That sounds modest, until an explanation is forthcoming: “That is the equivalent of 10,000 barrels of oil,” he says.<\/p>\n
He is not alone. This autumn, short-term traders have been drilling energetically for profits in oil markets that have remained volatile more than six months after the end of “major combat operations” in Iraq.<\/p>\n
Speculative activity is evident everywhere, from the crude oil futures markets run by the International Petroleum Exchange in London and the New York Mercantile Exchange, to the smaller-scale environment of British spread betting.<\/p>\n
“Volumes in oil have been very high,” says Peter Martin, senior dealer at spread bookmaker IG Index.<\/p>\n
“In recent days, we have seen perhaps twice as much business as we would usually expect in US Nymex, Brent crude and heating oil. Last week, it was mainly selling, but this week the buyers have come back in.”<\/p>\n
Figures from the IPE show September produced trading volumes in Brent crude oil futures of 2.2 million contracts, up 16% on the same month last year, with gas oil futures trading 822,000 contracts, up 17%.<\/p>\n
Daily volume records in Brent crude at the IPE were broken on both 9 and 10 October.<\/p>\n
This frenzied activity, from industry participants, hedge funds and individual speculators, might seem surprising given that the crises overhanging the oil market earlier this year – such as war in Iraq and production problems in Venezuela and Nigeria – have eased.<\/p>\n
However, what has kept the pot bubbling has been a series of surprises, including last month’s decision by the Opec cartel to cut production by 900,000 barrels a day and the fall in the dollar’s value against the yen and euro over the past month.<\/p>\n
Lawrence Eagles, senior oil analyst at the International Energy Agency, says: “When people fear a significant price move, it tends to lead to increased hedging activity by the oil industry.”<\/p>\n
MEANWHILE, speculative funds are said to have been “whipsawed” by price moves that saw US Nymex oil for immediate delivery jump from $26.50 a barrel in mid-September to a peak of $32.50 last week, before retreating to the $30 area. “Hedge funds have gone from a large long position, to a large short position, to a large long position, and are probably back all-square again,” says one observer.<\/p>\n
For individual traders, one strategy is to watch key indicators such as weekly US oil stock levels, and the weather forecast for North America – cold weather boosts demand for heating oil – and try to anticipate how the oil price will react.<\/p>\n
Or they can try to play one oil futures contract against another. The main ones – Brent, Nymex, US gasoline and heating oil\/gas oil – do not always move in unison.<\/p>\n
The Home Counties-based trader says: “Gasoline prices tend to be highest during the American driving season in the summer, and heating oil prices tend to be highest during the Northern Hemisphere winter.<\/p>\n
“However, the gap between the heating oil price and the gasoline price is very wide for the time of year. I am thinking of trading the two against each other, by going long of gasoline and short of heating oil,” he says.<\/p>\n
An alternative is a “time trade”. The Nymex crude price is in backwardation, which means its price for immediate delivery is higher – by about $2 a barrel yesterday – than its price for delivery next April.<\/p>\n
Someone looking for Opec to relax its grip on shortterm supplies in coming weeks could go short of the December future, and long of the April 2004 future.<\/p>\n
Angus McCrone has a spread-betting website at www.onewaybet.com<\/p>\n","protected":false},"excerpt":{"rendered":"
HIS typical trade, one Home Counties-based investor tells me, would be “10 lots”. That sounds modest, until an explanation is forthcoming: “That is the equivalent of 10,000 barrels of oil,” he says. He is not alone. This autumn, short-term traders […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1477","post","type-post","status-publish","format-standard","hentry","category-hedgeco-news"],"_links":{"self":[{"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/1477","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=1477"}],"version-history":[{"count":0,"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/1477\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=1477"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=1477"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=1477"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}