Economist Philip Verleger has undertaken an effort to estimate the amount of money that is going into the commodity indexes such as the Standard & Poor's GSCI (like Platts, owned by McGraw-Hill) and the DJ-AIG index, and specifically, the amount of money flowing into exchange-traded contracts as a result of investments into the two funds.
His process for getting there is complex. It is based on three known pieces of data:
A) A weekly report of the Commodity Futures Trading Commission, above and beyond the normal report on open interest of commercials and non-commercials, that lays out specifically the agricultural holdings of the Commodity Index Traders, a category known as CIT. Such data do not yet exist for petroleum.
B) the various weightings of the commodities that go into the respective indexes, with particular interest in the three agricultural contracts that are part of the GSCI and the DJ-AIG.
C) the prices of those agricultural commodities.
Two of the contracts, Kansas City Board of Trade wheat and Chicago Mercantile Exchange cattle, are just in the GSCI. The Chicago Board of Trade soybean contract is just in the DJ-AIG. That makes estimating the amount of money in the indexes "clean," since the CFTC data on CIT positions do not need to be split between two indexes.
He uses that data to then go backward and estimate the amount of money flowing into the indexes as a whole. From that, an estimate of the amount of money flowing into the petroleum portions of the GSCI and DJ-AIG can be estimated, on the basis of the respective weightings.
Verleger concedes flaws. The two indexes in question are not the entire universe of commodity indexes, but they make up the vast majority of trade. He assumes immediate cash investment of new investor money, which is not always the case. He is very open about these shortcomings.
He's going to post his data each Monday afternoon at this site.
In his most recent estimate, through March 18, Verleger estimated that the value of index positions in the WTI contract, either through the NYMEX contract of the ICE "look-alike," is approximately $52 billion. Brent is $17.3 billion; heating oil $10.2 billion; ICE gasoil $5.86 billion, and RBOB gasoline, $5.268 billion.
The rise in one year is staggering, though obviously, higher outright prices play a large part. A year ago, Verleger's estimates were almost $28 billion in WTI, $9.1 billion in Brent, $5.4 in heating oil, $3.1 billion in gasoil and $2.8 billion in gasoline.
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