Phil Flynn Talks High Oil Prices With ONN.TV

StreetSmarts, a weekly interview program hosted by www.onn.tv, interviewed Phil Flynn from Alaron Trading, a regular contributor to the Fox Business News Network. Kevin Cook sat down with Flynn to find what’s going on behind the headlines of $129 barrel oil, and whether those high prices are here to stay. As oil continues its meteoric rise, the markets debate the reality of “peak” oil. Many analysts believe that the market has reached a point of peak oil, where the world is reaching the end of natural oil supplies–which means oil prices will only go higher because demand will persist in outstripping supply. But others have pointed to the market itself and noted that if the long-term fundamentals were predicting continued higher prices, then the back month oil future contracts would reflect this.

Flynn suggests that a shift is starting to occur that may win the argument for the peak camp. Today, as oil hits a new record high, the back month contracts for delivery up to eight years out are all trading higher. Some analysts and traders think that the market is finally recognizing the real possibility of supply disruptions, and that oil traders may be taking a longer-term view on the situation. Instead of discounting the near-term demand spikes by selling the further out contracts, the market is actually acting like it may “pay to put oil away.” In other words, if oil industry participants believe that prices will maintain at these levels, then they will gladly store it in hopes that they can charge even more down the road.

According to Flynn, oil traders capitalize on this by trading spreads. In the last few months traders were willing to buy the front month contracts and sell the back months. Now, they are more likely to sell the front and buy the farther dated contracts. See the complete 11-minute interview only at www.ONN.tv.

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