Commodity Bubble or Not? It Makes A Big Difference!! - July 1, 2008
July, 2008
Traditionally, oil and gas prices have responded to fundamentals (supply, demand, and inventory). By our calculation, about 85% of oil and natural gas price movements used to be explained by changes in inventory (Economics 101). Now, 85% of price movements appear to be driven by speculation.
In late 2003, a new force entered the price equation – “momentum speculators”. Two things are significant about these new momentum traders. One is the sheer size of their positions – we believe they may represent about 75% of the futures’ markets, meaning they control prices. Secondly, their style of decision making is based on momentum.
Momentum trading is based on the premise that a trend will persist (up or down), and is dependent upon an expectation that some future event(s) will maintain that trend. These traders primarily focus on direction of price as opposed to absolute price. Yet in the physical world, we as producers and users are driven by absolute price.
Capitulation of the Natural Gas Markets in 2008??
December 3, 2007
Natural gas prices have remained relatively flat this fall
with a bearish tinge to sentiment. The market appears
uncertain about natural gas prices going into this winter.
Our view is that natural gas prices and futures will have
to soften considerably in order to see capitulation in the
marketplace. We’ll need capitulation in order to move
into a cycle bottom for this commodity.
There are three key events that could lead to natural gas
capitulation in 2008.
Please contact us at (403) 205-3255 or toll free at 1 (888)
295-3255 to discuss SBM Advisory services and how we
can add value to your organization.
SBM Announces Roll Out Of New Website
May 14, 2007
SBM Inc. wishes to announce the roll out of their new website effective May 14, 2007. A new-look front end has been built onto the www.commoditycycle.com website to meet a growing interest in SBM services throughout Canada and the United States.