Options Wonderland

[samaelrocks]

I learned something recently in my watching/reading about oil. Speculation is the perception of supply/demand like any other stock/commodity. They are two ends of oil as a tradable resource balancing each other out. But it is the speculation end that sets the price.

For example, a year from now, we see demand is dropping due to more companies letting folks work from home, hybrids, hydrogen, etc. And the demand is dropping faster than what was expected. So speculators start selling because they think the trend will continue into the future, thus dropping the price of oil.

At the end of the day, oil companies sell the oil based on whatever price is pinned up on the speculator's bulletin board rather than look at their individual supplies and come up with their own individual price. However, I've yet to hear of an oil company telling the market that oil contracts are too high because we have plenty of supply (which apparently was true today) and should be selling for less. LOL! The opposite occurs daily.



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As long as we read only that with which we agree, we learn nothing. - Chester Dolan