04-02-09 by dugan
Oil, being a commodity that people buy and consume, ought to be priced according to supply and demand. Of course, we know that’s not true. But it’s still a little surprising to see oil prices rise close to 10% in a day, to about $53 a barrel, just because the stock market made a smiley face. The industry publication Oil Express (subscription barrier) noted that speculators (known in the lingo as "noncommercial traders") were the ones pushing up the market.
From Oil Express:
Again, there were no fundamental news items to account for today’s rally. It was
triggered by strong buying in the London market, and U.S. traders (mostly non-
commercial entities) chased prices higher through most of the formal NYMEX session.
Today’s optimism may give way to even greater zeal, or it could prove to be yet another
mood swing in what has been a very inconsistent spring.
A big oil price spike like that usually carries through to gasoline prices faster than an equivalent drop, unless the oil price goes right back down. The underlying issue is that speculation still drives price.