Publications: Notes at the Margin

Confused (February 18, 2019)


No organization commenting on markets and no analyst following the market—none—have bothered to note the role that hedging has played in pushing prices down. The lack of interest in the slow flash crash is astounding. It is as if everyone who follows the oil market is doing the equivalent of asking Mrs. Lincoln in 1865, "Sorry about events, but how did you like the play?" Maybe we are out of touch. Maybe we do not understand oil markets. Maybe. However, our model that links changes in volatility and inventories to oil price changes continues to be correct. The numbers do not lie. Prices are following our scenarios, not the ones put out in the petroleum or general financial press. The data tell an important story. Those seeking to profit or survive should pay attention. Beyond the oil market data, though, market participants need to focus on real-world events. Were these individuals to look beyond the cuts announced by Saudi Arabia and other oil producers, they would notice some worrisome developments.


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