How are oil speculators not the same as hedgefund managers?

[Skidmore]

It seems to me that both are hedging their bets on the market. Why should the price of oil be tied to future supply and not present supply available?

[Name removed]

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[rfranklin]

2. Hedge fund managers are speculators...one and the same...

versus businesses that use large amounts of petroleum products, like airlines, who need to control the cost of their fuel. They buy futures so that they can better predict their fuel costs and set ticket prices. Hedge fund managers are merely trying to profit from changes in the price of those futures.

[Skidmore]

3. It seems to me that they are doing the same thing,

profiting from changes in the price to reduce risk. Thumbs on the scale.

[dkf]

4. Makes you wonder why anyone thinks cap and trade would work huh?

[badtoworse]

9. What difference does it make? They are both taking the same risks.

[sixmile]

5. They are not necessarily one in the same

You can be a oil speculator without having much money. You simply need enough to buy or sell option contracts, thereby allowing you or I to be oil speculators should we choose (though I don't have the cash to move a market!)

A hedge fund manager is a highly paid investment manager who manages millions of dollars of money and usually gets paid based on a percentage of returns. It is possible to manage money without purchasing options contracts, therefore not all hedge fund managers are necessarily speculators. Likely there are those who invest strictly in conservative instruments and simply hedge those bets by selling option contracts versus the underlying investment.

[elleng]

6. They are surely similar, but

speculation on commodities/futures has a direct effect on prices of necessities in the marketplace; hedgefunds not so much.

[sixmile]

7. Unless the hedge fund is cornering a market

which many of them have plenty of capital to do. That is one of the reasons we need commodities market reforms.

[elleng]

8. Sure, should have said depends on what the h.funds do,

what kind of securities they're in. We've actually got commodities market reforms on the books; CFTC is not properly enforcing.

[rfranklin]

10. Bloomberg seems to think the hedge funds are speculating in oil

Hedge funds raised bullish bets on oil by the most in eight weeks on concern that political unrest in Egypt will spread and disrupt supplies from oil-producing countries in the Middle East.

The funds and other large speculators increased net-long positions, or wagers on rising prices, by 17 percent in the seven days ended Feb. 1, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the largest gain since the week ended Dec. 7.

http://www.bloomberg.com/news/2011-02-07/hedge-fund-oil-wagers-surge-most-in-eight-weeks-on-egypt-energy-markets.html

[elleng]

11. Good source.

Damn