What is a paper barrel?
paper barrel is an oil cargo that is sold and traded in the open market, but is not actually supplied; Basically, the load is passed back and forth on paper, hence the name "paper barrel". Obviously, at some point the oil will be delivered to oil, but it can change hands several times in the form of a paper barrel before delivery actually happens. Trading with paper barrels, as you can imagine, can significantly increase the price of oil, and at a time when oil prices appear to be sharply rising, many people suspect that trading in paper barrels can be the culprit. Many areas have a long history of futures trading for things such as pork abdomen, wheat, corn, etc. Futures trading had its origin from farmers who would travel to the urban area to obtain contracts for the sale of their crops before they actually sold the crop. By achieving Agmed-up-up Price Early, many farmers hoped to ensure basic profit for their crop, but also bet that prices of crops do notwill increase considerably.
Again, a person who concluded a contract may decide to sell. Over time, Futures trading began to dominate in many markets, and today many large goods are traded in the form of futures, including oil. A paper barrel is simply an oil futures contract, purchased, sold and traded in the hope of making a profit.
Like other Futures stores, oil futures rely on speculation. Prices can rise in response to natural disasters, refiner problems and expected low production and may drop when the excess is predicted. Anyone holding paper barrels hopes to benefit from them, and few people intend to take "wet delivery", the real delivery of oil. Because most paper barrel trading occurs in investment companies, banks, and stock exchanges, most people who trade with oil futures actually have only abstractImages of processing, refining and transport of oil and they would not have an idea of what to do with the actual load of oil.
Every time a paper barrel is sold, the value usually rises if someone does not lose interest in avoiding further losses. When trading is hot, it can rapidly increase oil prices, causing radical prices for barrel and subsequently raising fuel prices. Some people have suggested that speculation in oil futures should be limited in order to avoid price inflation, but others say it is simply a free market function and that the market will eventually fix if prices are dangerously high.