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Economics of Oil Futures Trading, Part II
Posted on June 17, 2008
From this previous post on the economics of oil futures trading:$100 Spot Price per barrel + $5 Carrying Cost Per Barrel = $105 Futures Price (1 year)Now suppose that speculators anticipate rising future oil prices, due to increasing global demand in China and India, and tightening world oil supplies. As in my previous example, let's assume that the increased speculative futures trading raises the price of oil in the futures market to $110 per barrel for delivery in one year, which then also raises the spot price to $105. Q: What's could be so beneficial about speculators trading in oil future...
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