A SQUEEZER ROUND THE CORNER - SELF-REGULATION AND FORWARD MARKETS

Squeezes are registered in the forward market for Brent crude oil. The squeezer accumulates forward contracts and creates artificial demand. This causes the price to surge and introduces uncertainty about the m arket outcome. Squeezes therefore render the market institution less p alatable to other market participants. Producers may have a long term interest in keeping market clearing smooth, e.g. by supplying stocks t o squeezed traders. The extent to which such self-regulation should be carried out is analysed in the context of a repealed game. Unless the probability of a squeeze is very small, self-regulation should be pos sible.