They should be banning all the financial only/paper traders. If you can’t take delivery you can’t trade.

pipodeclown 8 hours ago | parent | next [-]

That really makes absolutely no sense. Derivatives whole purpose is to allow people to hedge their exposure to the underlying, in this case oil prices. Many parties active on these markets have such exposure but are unable or unwilling to take delivery as part of that hedging contract..

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bluGill 8 hours ago | parent | prev | next [-]

The people who take delivery hate that. They want someone else to pay for the oil that isn't in their possession yet. There is a lot of money worth of oil sitting in transport and the people who trade oil are the only ones who want that much money sitting around. (often people play the same market, but they like the separation anyway)

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grebc 5 hours ago | parent [-]

You speak to refiners do you?

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bluGill 4 hours ago | parent [-]

Many different people in several unrelated industries. They all don't like money tied up in product. They are happy to take the typical loss of selling the contract to deliver later because they want the cash to pay bills and otherwise invest now.

This is often called diversification in finance. When you have a lot of money tied into one thing it is good to sell some now for that reason even though everybody knows you won't deliver for months.

	▲	grebc 4 hours ago \| parent [-]
		Diversification is different to derivatives, and also cashflow. I’ve known plenty of farmers & co-ops. Big, medium, small, family. None used derivatives, at least not after trying them. A lot tried but never worked out like the finance people sold it to them. It’s always finance people selling them, talking about the need. It’s great there’s a market for it. You don’t need finance people mucking things up when actual delivery is the problem.

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xboxnolifes 8 hours ago | parent | prev | next [-]

Why?

	▲	grebc 7 hours ago \| parent \| next [-]
		You don’t need people trying to pick up pennies in front of a gigantic steam roller.
	▲	AnimalMuppet 8 hours ago \| parent \| prev [-]
		I think the idea is that oil is expensive primarily because of speculators. That seems nuts to me. Oil might (just hypothetically) be expensive due to some kind of supply-demand imbalance.

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nutjob2 7 hours ago | parent | prev [-]

The big commodity traders have no problem with taking delivery. They use storage and shipping as a part of their strategy. They make many billions each year, even more so when there is disruption.