As promised, here it is!
The post about "paper barrels" and their usefulness...
Question "utility" it will be very hard to find one ^^ apart from pure speculation on the markets and manipulation of oil prices.
The "futures" market is called the "paper" market because if you can buy real barrels of oil, you can also buy it on paper.
Oil is bought and sold "on paper" based on an estimated future value and there is generally no physical exchange of the product .
These operations are carried out on futures markets, the two main ones being the NYMEX (New York Mercantile Exchange, our good old Wall Street), bought in August 2008 by the Chicago Mercantile Exchange, and the IPE (International Petroleum Exchange) which became ICE Futures (Intercontinental Exchange in London).
Well you would have understood, paper barrels are the barrels that we buy as traders on the futures markets, this prevents people from coming to us deliver them to our garden.
We buy them to resell them, hoping in passing for a gain in price, and yes, otherwise they are even less useful!
The problem with these paper barrels is that they flood the market and completely distort its reality!
Because in addition to not being physically delivered, the paper barrel is bought for a pittance!
When you want to buy, for example, 500 barrels physically, which cost 80 USD per unit, you will have to spend 40,000 USD.
On the other hand, for these "fake barrels" bought only on paper, there are leverage effects of 100 or even 200... which means that I will buy those 500 barrels at 400 USD or even just 200 USD!
The desire and the temptation will only be greater to get me more!
This is how hedge fund traders buy astronomical amounts of paper barrels that simply don't exist...
Buy or sell elsewhere...
A study of the American Economic and Political Review Executive Intelligence Review established that at 570 "paper barrels" on the IPE corresponds a single barrel of real oil!
In other words, it is these 570 fictitious contracts that determine the price of this barrel... hey youyyy...
It's the dichotomy between "Main Street" and "Wall Street".
We call "Main Street" the reality on the ground, the real barrels that are physically exchanged and will be used by refiners to be transformed into gasoline, kerosene and others...
And "Wall Street" the speculation of paper barrels, which simply don't exist.
Increasingly there can be a huge chasm between the reality on the ground and the speculative world.
Having a foot in the scientific field, when I started trading, I necessarily analyzed macroeconomic data with my scientific mind...
That is: 1+n = n+1 , this is the base.
And you know what? I stopped very quickly!
Because I quickly realized that in the mind of a trader, 1+n = 3@9!&
Yes, yes... I promise!
At times there is no logic to market movements... except for the surplus of paper barrels which distorts the situation and causes the price of oil to rise or fall.
And the worst part of it all is that experts are trying to find rational correlations to oil movements that can be completely irrational. By associating certain soft or hard data with a movement in the oil market.
I'll show you all of this...
Currently, barrel prices are particularly low for the period, $71 per barrel of BRENT just a few days ago... that's it is the fault of "Wall Street"!
Because at "Main Street" level we have:
- The peak driving season that has begun
- Russian oil embargo
- OPEC+ production quota cuts effective since May.
- The USA and India, which announced the massive purchase of crude to rebuild their strategic stocks from July.
- There hasn't been so little unemployment in the US for a long time... people are consuming!
- And so on...
The market should be super bullish!
However, any crash in the price of a barrel...
But if we listen to the specialists, it's China's fault if oil falls because China's post-COVID market recovery has not been as dazzling as expected...
Serious guys? Is that your correlation to explain low oil prices?
Wait... I'm pulling out my trading diary from last year...
I wrote there on the exact same date, June 6, 2022, BRENT was trading at 121 USD... and I remind you that at the at the time China had confined Shanghai, that is to say that entire districts were padlocked!
Do you think a padlocked Chinese at home is more productive than a Chinese at the factory today?
And you tell us that now China is not productive enough in the eyes of the whole world, and that is your explanation for the 50 USD difference ?!
That's what I call the logic of traders: 1+ n = 3@9!&
Full stop.
That's why Abdelaziz bin Salman warned hedge fund short sellers, "stop shorting oil!"... Because he doesn't There is NO macroeconomic REASON for oil to crash so hard... apart from the paper barrels which have flooded the oil market downwards.
It should also be pointed out that most traders are not human...
And there is no joke behind all that, it's to be taken literally!
65% of trades made on the market are done by algorithms (see article from the blog: "Flash crash of May 4 00:05" ) These are algorithms and robot traders who place the majority of orders on the futures market.
Note for traders: stop looking for complications, it will make your life easier.
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