The Oil Markets: Let the Data Speak for Itself

We discuss how many facets of the world oil market are too opaque, including future productive capacity estimates from important suppliers, inventory statistics from important non-OECD consumers, and summary position data from over-the-counter derivatives participants. For policymakers and their economists to make sound decisions, there must simply be more transparency in these markets. We take the position that the petroleum-complex futures markets contribute to the transparency of the oil markets. Even when fundamental data on the oil markets are sparse or opaque, large-scale supply-and-demand shifts leave footprints in futures-price relationships, from which one can potentially infer the market's fundamentals. Our paper provides several case-studies on this type of analysis. In the presence of active futures markets, an observer need not be a member of a cartel or a large corporation to gain insights into the oil market.