To equate demand for financial bets on commodities with demand for the commodity itself is a fundamental misconception of how these markets work.

If there is a problem in the oil market - and I for one would not rule it out - it certainly does not manifest itself on the futures market, which is the market tail, not the dog.

This snippet from a recent Henry Liu piece is getting to the heart of it, I think

But now... oil in the ground can be more valuable than oil above ground because
it can serve as a monetizable asset of rising value through asset-backed securities (ABS)
in the wild, wild world of structured finance (derivatives).

So while there is incentive to find more oil reserves to enlarge the asset base, there is
little incentive to pump it out of the ground merely to keep prices low...

If there is a bubble it has been created through the relationship between oil producers and investment bankers.

To the extent that speculative money has made geared forward purchases of oil then the market is exposed to  a rapid downturn.

I have been invited to give evidence to the UK Parliament's Treasury Select Committee next Tuesday (15th) morning (09.45 hrs), alongside a couple of academics (one is Leo Drollas, an oil specialist) and the chief Shell economist.

As far as I know, I'm the only one of the four whose core competence is market regulation.

I guess our role is to give the Committee the ammunition to then ask pertinent questions of the people from ICE Futures Europe (formerly known as IPE, and of which I was once Director of Compliance and Market Supervision), and a couple of people from the FSA.

"The future is already here -- it's just not very evenly distributed" William Gibson