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Posts tagged “commodities”

By James Hamilton on May 30, 2012 with no responses

Effects of Index-Fund Investing on Oil Prices

In my previous post I described a new research paper with University of Chicago Professor Cynthia Wu on the Effects of Index-Fund Investing on Commodity Futures Prices. Previously I discussed what we found for the prices of agricultural commodities. Here I review our findings about oil prices.

Part of the interest in a possible effect of commodity-index funds on oil prices comes from testimony before the U.S. Senate by hedge fund manager Michael Masters, in which he produced a provocative graph of oil prices against an estimate of the number of crude oil futures contracts held by commodity-index funds. We reproduced his methodology to update his graph below. The figure certainly seems to suggest a strong connection between these two series, particularly during 2008 and 2009.

Price of near crude oil contract (left scale) and number of crude oil contracts held by index traders as imputed by Masters' method (right scale). Source: Hamilton and Wu (2012).


By James Hamilton on Feb 27, 2012 with 2 responses

Factors in the Recent Oil Price Increases

Crude oil prices surged last spring following disruptions in oil production from Libya, and had been drifting down during the summer and fall. But since the beginning of October, the price of West Texas Intermediate and Brent crude oil have both risen by over 30%, putting them back up near where they had been last spring. What’s changed in the world since the beginning of October?

Price of West Texas Intermediate, dollars per barrel, weekly Jan 7, 2011 to Feb 24, 2012. Data source: Webstract.


By Robert Rapier on Nov 12, 2007 with no responses

Prepare for Volatility

I saw a comment from someone yesterday that if this week’s inventory report shows a sharp drop in crude inventories, oil will probably spike up above $100. I do think that because of the storms in the North Sea and the flooding in Mexico we will see a decent inventory draw this week. But I don’t think the price will spike to $100 on the news, because this week is complicated by a number of factors. The first is that the inventory report will be delayed by a day this week, due to the government holiday on Monday. The second is that the front-month WTI contract expires the day after the inventory report is released. There are a lot of… Continue»