OPEC
has
increased
production
again,
and
the
physical
market
is
currently
quite
comfortably
supplied.
There
are
no
immediate
queues
out
there
for
crude
oil,
and
inventories
are
at
normal
levels.
Since
the
start
of
July,
the
futures
market
has
again
realised
this
disconnection,
and
there
has
been
a
sharp
adjustment
down
in
prices.
However,
if
talk
of an
impending
‘oil
supply
crunch’
captures
the
imagination
of
money
managers,
or if
geopolitics
rears
its
ugly
head
again,
then
prices
may
rise
once
more.
Financial
investors,
thus,
can
accelerate
or
decelerate
existing
price
movements,
based
on
their
expectations
of
what
is
going
on in
the
physical
market
– and
these
may
be
correct
or
incorrect.
Ultimately,
the
market
punishes
those
who
base
financial
investment
on
incorrect
assessments
of
the
underlying
physical
market.
There
is,
therefore,
no
reason
to
limit
the
many
advantages
a
functioning
futures
market
brings
to
commercial
participants
– for
example,
the
possibility
to
hedge
and
to
ensure
future
deliveries
at
prices
known
today
– by
restricting
the
access
to
financial
investments
in
crude
oil.
http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/B/The_big_issue.pdf
