Ah, but they do in a funny way. A producer has a choice. He can sell his barrel on the spot market for immediate delivery, or he can sell his barrel on the futures market with a promise of future delivery. For the future delivery he merely needs to leave the oil in the ground until he needs to deliver it. However, with growing long side only speculators, the amount of oil that is promised for future delivery has grown exponentially. So long as long side positions continue to grow, that is oil that stays off the market. Furthermore, as demand is growing, it is safe to accumulate supply.
If one looks at futures price action in oil there is nothing that would indicate that anyone needs to start liquidating his position anytime soon. In fact, the price signals are, if anything, "buy."
You can't grow long positions without growing short positions equally . It's a zero sum game.
You can grow what is termed "open interest" however. i.e. total contracts outstanding.
Exactly. He can sell his 1,000,000 barrels of expected August 1st production on August 1st or he can sell 1000 July futures contract on Monday and deliver his 1,000,000 barrels on August 1st.
For the future delivery he merely needs to leave the oil in the ground until he needs to deliver it.
For the spot delivery he merely needs to leave the oil in the ground until he needs to deliver it.
So long as long side positions continue to grow, that is oil that stays off the market.
No, the oil is not staying off the market.