This past Thursday, Oil inventories came in with an 8.8 M bbd draw. You could see that crude spiked and then started to drop all of a sudden… did something change in the fundamental picture?
This is where the discrepancy between what oil is fundamentally worth and what a contract is worth to a trader comes into play. This past week, NYMEX increased the margins you need to trade crude oil contracts, both regular and miNY contracts.
Margins for the crude oil, crude oil calendar swap, and crude oil financial futures contracts will go up to $7,250 from $6,500 for clearing members, to $7,975 from $7,150 for members and to $9,788 from $8,775 for customers, NYMEX said in a release.
Margins for the NYMEX miNY crude oil futures contract will rise to $3,625 from $3,250 for clearing members, to $3,988 from $3,575 for members and to $4,894 from $4,388 for customers. Margins for the NYMEX MACI index futures contract will increase to $1,450 from $1,300 for clearing members, to $1,595 from $1,430 for members and to $1,958 from $1,755 for customers.
This decreases the ability for some players to use as many contracts as they used to, as well as some players who can’t trade at all. This has reduced the demand of these contracts significantly, which explains the drop in price.
Hopefully this drop in the price of the contract will keep going as some speculators will have the fear of Vishnu put in them, which will cause a significant correction down to more fundamentally sound levels.
Thanks to Barry for reminding me of this.