With oil prices on the decline, is it time to celebrate or is it the time to cautiously trade in this commodity? Latest reports suggest there is ample US supplies and the world is expecting an announcement from OPEC over possible production cuts.

In August crude oil prices hovered around just below $80 a barrel and during oil's climb, India and China were seen as the insatible oil guzzling nations, pushing up the price. By October the oil prices dwindled, explaining India and China were not the main reasons for spiralling prices. There were more reasons than what met the eyes.

The US Commodity Futures Trading Commission oversees all futures trading on U.S. markets. It is constantly monitoring the positions of large speculators. But who keeps track of murky over-the-counter market where billions of dollars of contracts are traded. So there are a lot of speculative money that is not screened which exposes the oil market to price manipulation. With oil prices down, more speculative money is expected to do its usual rounds in the oil market.

However, the situation continues to be bullish with markets exhibiting contango. Contango is a futures market term for the situation in which price of a commodity for future delivery is higher than the spot price. A contango is normal for a non-perishable commodity which has a cost of carry. Hence, the argument of speculation is tied to contango and the impact it's having on oil prices.

It is thus logical to deduce that oil companies and others like to buy futures contracts to make sure they've got oil coming to them well into the future. An estimated $60 billion has poured into regulated U.S. oil futures markets in the past few years. However, analysts say that  people who have nothing to do with the oil industry are also buying oil futures, holding them as can't-lose investments.

For instance investment banks from Morgan Stanley to Goldman Sachs are reportedly making so much money from oil futures that they've become a hot investment for all sorts of big-money players. Some of the biggest players are US pension funds and college endowments, which have put billions of dollars into oil futures. Some reports suggests oil inventories (2.7 billion barrels) are at their highest levels in developed countries since 1999 due to the contango effect. 

Jason Feer of Argus Media while speaking to CNBC-TV18 said crude will attract speculative money at lower levels. Some analysts argue that the gradual building of the capacity cushion will kill the threat of supply disruption. When speculators start unwinding their oil futures positions, the rush for the exits will begin, pushing down oil prices.

In the light of the above argument is it safe to assume that the recent selling and liquidation by Amaranth (a failed hedge fund that was one of the bigger players in natural gas market)  may have pushed prices down together with factors like ample supply and other geo-political reasons?