Publications: Notes at the Margin

Changing Oil Futures Market (January 10, 2022)

 

Those who rely on oil futures markets likely celebrated 2021’s passing while hoping for a better 2022. They had a good reason for dismissing 2021. This year, though, may be little better for them because oil futures markets are shrinking. The decline can be observed in all crude oil and petroleum product markets. Decreasing commercial participation is the cause. The market shrinkage warns that price fluctuations will increase, especially if speculators and passive investors buy and sell in their past volumes.

 

In short, markets will see higher short-term highs and probably lower short-term lows. Overall, the decline in commercial participation should impart an upward bias to prices.

 

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