Animal Spirits in Crude Oil Markets

Michael Giberson

Still, the rise in oil prices from an average of $28 in 2003 has made commodity traders far superior performers than investors in the stock market. And for a while, that performance encouraged even more investors to pour even more money into oil futures.

Now some of the traders themselves wonder if they will drive prices too low by selling off once-profitable positions that are turning sour.

“On the way up, there is buying greed,? said Gary Pokoik, who manages Hedge Ventures Energy, a Los Angeles hedge fund. “And on the way down there is a selling panic. The drop could snowball.?

From the New York Times, “ Oil’s Rout Outpaces Its Advance.” And, by the way, what’s with these “hedge funds” making big bets on price movements? The Times: “Mr. Pokoik said that his modest-size fund, about $40 million, was tilted 70 percent toward long positions in energy stocks only two weeks ago, expecting prices to rise again.” Sounds like speculation to me.