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60 Minutes oil piece doesn't deliver the goods

I was looking forward to the 60 Minutes piece last night on oil speculation. Unfortunately, the piece was thin and extremely unenlightening. Morgan Stanley took huge positions in crude! Who knew! Barry Ritholtz has a good summary of things that were unmentioned or glossed over, below. I'll add one more. The piece threw around huge volume numbers on oil contracts traded vs. oil delivered, correctly showing there was lots of speculation. But it never explained how the spot price got to be be $145.

Forward markets are where the speculation takes place. Morgan Stanley and everybody else can trade futures all day because if you sell a contract before maturity you don't have to take delivery. But if speculation was the main driver, how did the spot price get so high also? The spot price reflects deliveries that have to be stored or sold and consumed, and speculation is much less of a factor. In fact NYT columnist Paul Krugman argued that speculation was a minimal factor because the huge, unsold inventories that would have indicated hoarding and speculators just didn't exist. The high spot price suggests that booming demand from China and the other factors Ritholtz mentions were also key factors. Ritholtz:

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