A LARGE WAREHOUSE in Amsterdam may seem an unusual place to attract the City’s top traders and hedge funds. But, in the past few months, Morgan Stanley has been accumulating warehouse space in the Netherlands to store its hottest new property — oil.

This and the tankers that have been hired by the investment bank illustrate just how important oil is now becoming in the City of London and Wall Street.

Morgan Stanley may be among the most advanced of the new breed of oil speculators, but, over the past year, many banks and hedge funds have joined the “black gold rush”. With the stock market proving lacklustre, the oil market has been a godsend for the banks, which describe it as the “new Nasdaq”.

Speculators have helped to drive oil prices to near record levels — peaking at almost $50 a barrel last month. Oil is the talk of the City with many millions of pounds being made every day, and oil traders are among the most sought-after employees.

“If you can spell derivative, you can earn six figures, and anyone who can navigate his way round the oil market is offered $1m just to sign a contract,” said one trading executive.

There have traditionally been two distinct oil markets. The first is the futures markets in London and New York that trade the right to buy oil at a predetermined point in the future. About one-sixth of all oil is sold this way, although most contracts are traded and then lapse without oil changing hands.

This “paper” market, the main stamping ground for speculators, acts as a benchmark for the price of oil in the second market — crude bought direct from oil companies.

If prices on the futures market rise too far above the so-called physical market, oil users such as airlines and

petrol dealers pull out, so prices fall. If prices on the futures market are lower than in the physical market, the users pile in, pushing up prices.

However, this traditional equilibrium has been rocked by short-term speculators dipping in and out of the futures market. This has led to sharp rises in the price and far more volatility.

Meanwhile, banks such as Morgan Stanley are also beginning to move into the physical market to buy oil — or even entire oilfields.

Morgan Stanley recently won the contract to supply fuel to United Airlines, and Goldman Sachs recently bought 10m barrels of oil.

A senior oil company executive said: “Even within this firm, the mechanics of the market are not widely understood. When oil prices go up, everyone talks about fundamentals and geopolitics, but the role of speculators and banks is now very significant.”