we have a post around here on how the futures markets work, and Jeff Vail has a post coming next week on backwardation.

The term "speculator" is probably too broad when used by the media - they should use "investor" instead. A lot of investment banks like Morgan Stanley are big players in the physical oil market (they own Transmontaigne). They are the real speculators when they take physical delivery and then store it in the hopes of selling it at a higher price in the future.

I too am baffled to understand how futures traders could significantly alter the market price of a commodity -- aside from moving it around in some kind of range based on fundamentals of supply and demand.

That's why I've been thinking there must be some actual physical hoarding going on now. Increasing inventory of this raw material seems very logical for a company whose business depends on having absolutely reliable sources of petroleum products, including companies who use petroleum products as feedstocks for plastics and chemicals.

Storing some spare quantity of the stuff is exactly what I would do if I were in that position, and was starting to worry about supply interruptions.

If there is in fact hoarding going on, I don't think it is being done for the purpose of turning a profit. It is usually only possible to profit from commodity price changes by trading contracts rather than the physical material. That's because the net profit for buying actual product low and selling it high would likely be quite small compared with the expense of doing so. Consider that one would have to acquire (or more likely, build) storage facilities, ship the product to the storage location, and then staff and maintain and protect that location, and finally ship the product on to its ultimate purchaser. In the face of such expenses, even a comparatively large increase in price would not be enough to gain much direct monetary profit from physical storage.

In summary, I think we are seeing some panic buying and hoarding, not for speculative profit but rather in pursuit of supply security. With the world market for oil as tight as it is now, even a very small increment of geographically widespread hoarding might move prices sharply higher.

Of course if supply later loosens up, such hoarding would contribute to increased volatility on the down side, too, since companies might then draw down their stored supplies for a while, rather than buying new product.