What do crude oil prices and Chinese stocks have in common?
Massive amounts of speculation are driving prices higher!
Global OTC commodity derivative exposure figures were released last night by the Bank of International Settlements. Open positions hit a new record as of December 2006.
Assuming just half the OTC exposure is in oil and that the average transaction price was $60/bbl, the size of the outstanding position equates to 53 billion barrels of crude which is about 21 months of what the world actually consumes and more than 20-times the size of current open interest for NYMEX oil. Guess what happens when this position eventually unwinds! Personally, I can't wait for that to happen.
Global OTC commodity derivative exposure figures were released last night by the Bank of International Settlements. Open positions hit a new record as of December 2006.
Assuming just half the OTC exposure is in oil and that the average transaction price was $60/bbl, the size of the outstanding position equates to 53 billion barrels of crude which is about 21 months of what the world actually consumes and more than 20-times the size of current open interest for NYMEX oil. Guess what happens when this position eventually unwinds! Personally, I can't wait for that to happen.
posted by Never-Limp at 6:39 AM
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