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Honestly, I do not have any idea about the size of the OTC derivatives markets for crude oil. My comments were focused on the cash market, which is rather small. As to price discovery, I think that it mainly takes place on the futures exchanges. Even your OTC dealer will look at the futures market, while the futures trader has no access to OTC prices.
I would like to get an idea about the forward, swap and options OTC volume, but could not find anything pertinent.
Fat Tails, you are a wealth of information. I'm glad you are here!
So to make a (perhaps overly) simple statement, for every physical barrel of oil out there in the world, there are about 10 barrels worth of futures contracts. Is that ratio anywhere close to correct?
As @TheDude pointed out, you need to make a difference between inventory (of physical oil) and open interest (of futures contracts) on the one side and trading volume (traders moving in and out of positions) on the other side.
It is much easier to trade paper compared to trading physical oil. Therefore the trading volume in paper oil (futures) and derivatives is much higher than the trading volume in physical oil. We talked about the spot trading volume and found
physical oil: trading volume < 25 million b/d
paper oil: trading volume > 500 million b/d
derivatives : trading volume unknown (but certainly much larger than physical oil)
Market size is determined by daily trading volume and not inventory.