Can oil speculator with $2 million really manipulate oil prices $10?

[mshan]

Cramer said that some speculator with $2 million (leveraged?) was able to manipulate oil markets by $10?

Is this really possible with that little capital?

(Bill Gross may be right that Cramer has good trading instincts, but I do question his long term investing savvy as he was crowing about the new bull market only weeks ago)

Madman Video

 

[EagleKeeper]

Over tha pst couple of years, I have been solicited by commodity brokers indicating that one can leverage between 10 and 100x your investment.

If $2M was leveraged by 10x,with oil at $50/bar; one has 400K bar to push around.
that does not seem to be a lot compared to the daily US requirements.

For a 100X leverage, it could have an impact.

 

[mshan]

Interesting.

Think daily global production is capped around 95 million barrels of oil per day.

Seems like speculator would have more impact when demand vs. available supplies (90 - 95 million barrels of oil) were perceived (page 4) to be tighter, like last summer (?)

 

[glenn1]

Originally posted by: mshan
Cramer said that some speculator with $2 million (leveraged?) was able to manipulate oil markets by $10?

It's possible depending on volumes and how one played the trades. After all, the marginal trade is what controls the price, so if you have someone taking an outsized position in a thinly traded contract it very well could move the market (of course, keeping it there is another story altogether).

 

[masteryoda34]

If $2 million was ready all that was needed, then why wouldn't Iran, Russia, Venezuela, OPEC, etc, etc be doing this to drive up the prices all the time?

 

[StageLeft]

Maybe, but Cramer says a lot of silly sh*t, much of it right and much of it woefully almost magically unright.

 

[gevorg]

Maybe for a couple of seconds in obscure options/futures contracts.

 

[dmcowen674]

Originally posted by: masteryoda34
If $2 million was ready all that was needed, then why wouldn't Iran, Russia, Venezuela, OPEC, etc, etc be doing this to drive up the prices all the time?

Who says they aren't

 

[GuitarDaddy]

I think the answer lies in the amount and type of speculation done by oil producing firms and hedge funds controlled or in partnership with oil producers. These guys are not influencing the price to make a profit speculating, they are speculating to drive the price up with the knowledge that any speculative losses they take on futures will be more than offset by production profits on higher current prices.

Just look at this years oil and gas stats, they make no sense compared to supply and demand. We have historically high inventory levels that are still increasing, we have consistently reducing demand, and yet the price of crude is up 41% on the year and retail gas is up 61%? Also look at the increased volume in oil futures trading in the last 5yrs, much like the derivitives market it has increased exponentialy during the runup to our current economic disaster.

8yrs of deregulation in the name of free market capitalism turned banks, investment firms/hedge funds, oil companies, insurance companies, and others into corrupt profit machines that literally sucked the life out of the economy. Just look the P&L's of these companies over the last 5yrs and compare them to any growth metric that you want, GDP whatever and you will see exponential growth compared to little or no growth in the general economy

 

[dmcowen674]

Originally posted by: mshan
Cramer said that some speculator with $2 million (leveraged?) was able to manipulate oil markets by $10?

Is this really possible with that little capital?

7-3-2009Oil prices drop further as 'rogue' trader probed

Meanwhile oil market officials here launched a probe into an alleged rogue trader who this week helped push prices to eight-month peaks, costing his company nearly 10 million dollars

David Peniket, president and chief operating officer of ICE Futures Europe, on Friday said his body investigated unusual trading activity as a "matter of course."

An oil brokerage, PVM Oil Associates, said on Friday that it was investigating suspected unauthorised trading within its company.

PVM was forced to unwind the series of unauthorised trades -- a move that in turn contributed to a sharp drop in prices, analysts said.

"The rogue oil trade on Tuesday just goes to show how easy it is to squeeze the market under thin trading conditions," said ETX Capital analyst Manoj Ladwa.

"Brent crude spiked above 73 dollars per barrel as a trader purchased the equivalent to 9.0 million barrels. The subsequent fall in price was due to PVM Oil Associates unwinding the position."

 

[imported_Lothar]

Dave Mcowen is an oil speculator.
He made tons of profits with his "Drive for $5" statements last year, there's no question about it.
I wouldn't be surprised to find out he works for Goldman Sachs or some other investment firm.

 

[yllus]

$2 million is small change when you're talking about that market.

 

[Jiggz]

Maybe the only thing that changed is that you shouldn't be watching Cramer anymore now or in the future! $2M is actually less than 30K barrels of oil! Do you even have an idea how much we burn on a hourly basis? U.S. can actually burn 30K bbl of oil in less than 3 minutes!

 

[JS80]

Originally posted by: Jiggz
Maybe the only thing that changed is that you shouldn't be watching Cramer anymore now or in the future! $2M is actually less than 30K barrels of oil! Do you even have an idea how much we burn on a hourly basis? U.S. can actually burn 30K bbl of oil in less than 3 minutes!

even at 10-20x leverage still 300-600k barrels. I've never traded nor seen contract bid/asks but I have a feeling that's like nothing. And it's like 1k barrels per contract so 300-600 contracts on a 250k contract volume for August.

100x leverages is 3,000 contracts, which is still like 1% of the volume.

My gut says Cramer is a douchebag.

 

[dmcowen674]

Originally posted by: JS80

Originally posted by: Jiggz
Maybe the only thing that changed is that you shouldn't be watching Cramer anymore now or in the future! $2M is actually less than 30K barrels of oil! Do you even have an idea how much we burn on a hourly basis? U.S. can actually burn 30K bbl of oil in less than 3 minutes!

even at 10-20x leverage still 300-600k barrels. I've never traded nor seen contract bid/asks but I have a feeling that's like nothing. And it's like 1k barrels per contract so 300-600 contracts on a 250k contract volume for August.

100x leverages is 3,000 contracts, which is still like 1% of the volume.

My gut says Cramer is a douchebag.

But he gets paid the big bucks

 

[rchiu]

Originally posted by: Common Courtesy
Over tha pst couple of years, I have been solicited by commodity brokers indicating that one can leverage between 10 and 100x your investment.

If $2M was leveraged by 10x,with oil at $50/bar; one has 400K bar to push around.
that does not seem to be a lot compared to the daily US requirements.

For a 100X leverage, it could have an impact.

It's more complex than that. When you talk about leverage and commodity trading, it's most likely about trading derivatives. (future, options..etc) While those derivatives do have actual impact to oil prices, it's not just simple supply and demand. Like you can push oil future real high and market will probably see that and someone will probably start selling oil future. So all these derivative price can go up and down from all these leverages based trading, but with only little impact to actual oil price.

 

[dmcowen674]

Meanwhile....

7-9-2009 Oil and Gas inventories at 25 year highs

A larger-than-expected rise of 3.7 million barrels in U.S. distillates stocks last week left them at close to a 25-year high