Emirates Business 24|7 reported that high oil prices have brought increased interest of speculators into oil futures trade with volumes of crude oil futures contract on Dubai Gold and Commodities Exchange doubling in the past 1 week.
As per report, while the volume of DGCX West Texas intermediate light sweet crude oil futures contract has averaged at around 600 contracts in September, its volume has doubled at a weekly average of 1,200.
The DWTI contract is available to both regional and international market participants, allowing them to benefit from trading and clearing transactions under the UAE regulatory and taxation regimes. The cash settled contract is sized at 1,000 barrels equivalent of oil. The DWTI contract has emerged as one of the most traded contracts on an exchange that is dominated by gold and currency futures.
On the other hand, the Dubai Mercantile Exchange is headed to record one of its best months ever, with average volumes registering a steady increase over the contracts traded in the past few months. The DME Oman crude oil futures contract for December delivery has been trading steadily in October with volumes reaching more than 2,100 throughout the past three weeks. The average volumes recorded until yesterday was double than that of September and 5 times the average daily volumes of December futures contract recorded in October 2008.
Mr Dheeraj Shahdadpuri a Dubai based oil analyst said that “Whenever oil prices increase, expectations thrive that prices will firm up in the future. This ushers confidence into oil futures."
Other analysts said that the recent rally in oil prices is not backed by demand and though oil futures show confidence now, future oil prices are expected to firm up only in the Q2 of 2010 when the global economy recovers. We see oil rising to USD 85 per barrel in the medium term. But there will be profit booking every time it crosses a psychological barrier."
A rally in oil prices has increased the difference between spot and future prices of oil. Recently, oil dropped 0.72% and stood at USD 79.72 per barrel and its price difference from the spot price was USD 2. It has ranged between USD 2 and USD 4 in the past week. The contango the difference between spot and future prices had almost evaporated until just a month ago. Pointing at weak fundamentals, analysts said that oil was running after equities and the value of the dollar and was also guided by technical charts.
Energy advisor Energy Intelligence said that "Less clear, but growing in the background is the impact of the market for options on oil futures, which can influence oil prices and are skewed towards the upside."
(Sourced from Emirates Business 24|7)
