Thursday, October 16, 2008

Let's Get Physical

Can we talk about it now ... the "bubble" in oil? Are we still sure there is no room for a risk-premium? It's all tied to physical supply and demand?

I ask because I'm actually very interested, having done a little bit of work once on oil market stuff.

I understand the 'physical arguments' and they are surely "a lock", so to speak. Yet, we have this chart in front of us, suggesting a re-thinking or a re-affirmation is in order. Could it be that it is because the amount traded, as a mater of "price discovery" via the pits, is so much less than the amount that actually exchanges hands, via OTC contracts that simply reference those prices?

Ticker USO, the OIL ETF. Is this last, steep leg down all "explained" by the falloff in BRIC demand and ... forced selling?

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