Monday, June 30, 2008

Further evidence regarding oil speculation

Bull Bear Trader points to a piece in the FT that states
"Barclays Capital is planning to enter the shipping business. The bank is attempting to increase its commodities exposure by hiring ships on long-term charter to move oil, gasoline, and diesel. As opposed to gaining exposure by taking derivative positions, Barclays hopes to cash in on the prices involved in hiring ships, which have been up more than 50% in the last six months. The move also allows them to support their new venture into the physical trading of oil. Physical trading allows for a more predictable price since you are not at the mercy of the spot market prices."
So we have a non-user/producer of oil trading the physical commodity...that is speculation. By gaining control of ships, this company could affect oil prices by holding ships they have contracted out of use, driving up prices for both the ships and the oil as they would be acting as a capacity constraint.

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