I remember reading, back over a year or so, that the large investment banks had begun taking futures positions in oil because of the high price and seemingly effortless price support in world markets. The investment banks intervention in the market helped to sustain the higher than normal price levels. I’m wondering if the falling prices indicate they have stopped being competitors in a falling commodities market, leaving the remaining bidders among those who actually convert the product.
"How low can and will oil prices go, and what will the effects of those prices be? I bet you’ll have a hard time finding even just two people who have the same opinion on that. Not that it’s merely a matter of opinion, mind you, there are a great number of real life factors that come into play. It’s not an easy game."
Why Crude Oil $80 Is the New Normal, Reasons Saudi Arabia Will Not “Swing”
"Now the dust from the Shock & Awe of the 30% drop in oil prices has started to settle, two things are clear: (a) Saudi Arabia did not engineer anything (b) they don’t have a Machiavellian plan to stick one up the wildcatters in North Dakota, or the Russians...the Iranians...the Venezuelans, or even the genius from the Daily Telegraph who was bemoaning the fact that if oil prices go down it will be hard to import inflation into U.K. Here are five good reasons why they are going to pass on the opportunity to slash their oil production by 30% so that other OPEC members can cheat and make a windfall, like they all did in 1987/8."
As a group, traders tend to be trend followers. The shibboleth in those circles is "the trend is your friend". This means if they see an uptrend, they will exaggerate it by adding to it via purchases. Ditto with a downtrend, via some type of short instrument.