Publications: Notes at the Margin

Close the Exits (August 5, 2024)

 

Money managers. a.k.a., speculators, play a significant role in determining short-run oil price movements. In this report, we examine thirty episodes dating from 2011 in which the net position of money managers declined by more than one hundred thousand futures and options equivalent WTI and Brent contracts on the Chicago Mercantile (CME) and InterContinental (ICE) exchanges. We find that, on average, the sale of one thousand contracts resulted in a price decline of $0.04 per barrel.

This finding should motivate oil-exporting countries to maintain an environment that promotes, rather than discourages, increased speculative participation.

 

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