The domino is starting to fall.

[HJ]

Most of the physical oil trades don't occur on exchanges.  They do, however, reference exchange prices.  So buyer A in physical world, may just sign a contract with producer B, and agree to take delivery of x MM tons of oil at delivery point C over a perios of time, at prices of NYMEX prices or Brent prices adjusted by cost of transport.  The actual value of that physical transaction never goes through the exchange.  The exchange prices is purely set by the money that plays in the exchanges, which is a small fraction of actual physical transactions.  The $ 260 billion is not a big percent of actual physical transactions in the world every year, but a huge number relative to the money that sets these prices in the exchanges.  I think his actual 19 page testimony does the job of explaining why it matterred quite effectively. 

 

That said, it doesn't say much of where oil is headed on the exchanges from here.  Physically we know that there is a surplus of supply right now, which was stimulated in the back drop of $90-$100 exchange traded oil price prevelant prior to 2014.  We know now in physical world, that was most likely too high.  We now test if there will be enough physical oil supplied in a $40-50 context.  The answer will not be obvious for a couple of years.  And it's a dynamic process, where productivity gains, technological changes might affect this physical supply demand balance in all sorts of different ways.  The crazy thing is they skipped a $70 range all together, and headed right to $40-50.  Meanwhile, buyers and sellers trade the heck out of it.   

 

[yadayada]

http://money.cnn.com/2015/02/03/investing/oil-price-rebound-opec-200/index.html?sr=twmoney020415opec1200story

[tengen]

Grantham's latest thoughts: http://online.barrons.com/articles/SB51367578116875004693704580443772734531324

[bookie71]

From the New York Times

http://www.nytimes.com/2015/02/09/us/matured-anchorage-struggles-to-shake-old-fears.html?_r=0