Oil shortage and a lack of traders could lead to a 'super spike.' I read about US oil glut but not enough to keep traders interested.
Dan Dicker, president of MercBloc and author of Oil’s Endless Bid says much has changed in the past few years, other factors also explain why oil has stagnated recently:
•Investment banks, particularly Morgan Stanley, Goldman Sachs, and JPMorgan have not only left oil trading but have also abandoned the oil marketing business, which used to bring a steady supply of new players to the energy market.
•Individual oil traders (including Dicker himself) have disappeared as well. Dicker speculates around 3,000 traders have left the industry.
•Remaining funds are trend and algorithmic firms with long-term positions already established.
•The big alpha players remaining in the oil trading business are physical commodity, private firms like Glencore, Vitol, and Trifugura among others.
Dicker believes these changes have all but killed immediate speculative activity, which has been good for consumers in the short term, but will be bad for the prospects of cheaper oil in the long term. Without the liquidity provided by these players in the energy market, a crude oil ‘super-spike’ could be in the cards.
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“When you have an oil price that’s hanging around $95, you won't see a $10 spike, you’ll see a $40 spike, because that’s what will be necessary to get these guys (oil exploration and production companies) ginned up” in order to produce more crude supply.