Speculation on the Crude Oil Market

The study deals with the topic of speculation on the crude oil market. This topic has been frequently discussed in association with the price hikes in 2008, but since the oil price has recently repeatedly reached levels over USD 100, the topic is still very present. We analyze the connection between the increasing open interest on the New York Mercantile Exchange crude oil futures market, the supply and demand factors for the crude oil and the crude oil price. Based on an error correction model analysis of monthly observations between 1994 and 2011, we show how an increase in the open interest, which is currently already comprised by the non-commercial traders by one half, can lead to a persistent increase in the crude oil prices.