US sues big oil traders for 2008 manipulation

[Craig234]

Goldman's energy trading was predominantly market making. You should be focusing on directional players, hedge funds and institutional money. Even prop trading as whole is peanuts compared to the mountain of money that money managers are allocating to commodities this year.

<- Trader

Thanks for the comment. Frankly, I'm not too familiar with where a lot of the big money is.

The Goldman comment was an aside about 'they're in the middle of that market, too'.

It'd be interesting to hear more about where various money is (e.g., sovereign wealth funds), but it seems our priority should be getting our government to represent us.

 

[Zebo]

But...but...bue...it's the dollar's decline in value?!?! No, it's peak oil!?!? No, it's Supply/demand...!?!?

LOL.

Yup oil should be $3 a barrel still like 1970s if it weren't for them speculators. All four are factors.

Do you deny there is not peak oil when IEA says we are depleting reserves at 6&#37; per year?
Do you deny other rich countries are coming online such as China and india competing for those reserves?
Do you deny the dollar is in the shitter trading ~75?

PS you have seen nothing yet. $200 predictions is low. (least I hope so since its retirement)

 

[Craig234]

Yup oil should be $3 a barrel still like 1970s if it weren't for them speculators. All four are factors.

Do you deny there is not peak oil when IEA says we are depleting reserves at 6% per year?
Do you deny other rich countries are coming online such as China and india competing for those reserves?
Do you deny the dollar is in the shitter trading ~75?

PS you have seen nothing yet. $200 predictions is low. (least I hope so since its retirement)

You sure proved the CEO of Exxon wrong that the market price would be $60-70 if not for speculation, by posting the ridiculous $3 comment.

 

[Zebo]

I never argued against speculation. Buying and selling future contracts on three major markets is what sets the price after all. The other factors play in that.

 

[SparkyJJO]

Is the declining value of the dollar part of it? YES.
Is speculation part of it? YES.
Is market supply and demand part of it? YES.

You can't say only one of these forces is the only reason and ignore the rest.

 

[LegendKiller]

I never argued against speculation. Buying and selling future contracts on three major markets is what sets the price after all. The other factors play in that.

Highly levered margin speculation of paper "demand" is the single largest contributor to price increases. The additional liquidity shoved into this market by hedge funds with minimal direct input into "price discovery" is huge, only a very ignorant person such as yourself would claim anything different.

Futures contracts are like Option-ARM mortgages for speculators, minimal capital deployment and maximum levered return. You put down a very small amount, while you may have to mark to market, it isn't always a huge deal, and realize huge levered profits. Since the capital is so small even a moderate hedge fund can afford to continuously bid up futures.

It may be a "zero sum" game, but when you also can profit off the physical market in return, it isn't zero-sum.

What's laughable is that even in the face of overwhelming evidence that the market is rigged for the benefit of the few, you still blame supply/demand. Exxon's own CEO said that the market is effectively 40&#37; overpriced right now. The 60-70 price IS supply/demand, the rest of it is levered paper supply/demand.

He's also probably hedging a bit. Considering oil went from 60 to 144 to 40 within the span of 24 months with the bulk of the major movements in less than 12, you come to see that they weren't taking a $20 loss on the back-end of that, nor were they completely flat on the front-end.

As far as 6%, please. As with anything else, supply/demand is based upon price. Peak oil is a joke.

 

[JS80]

Highly levered margin speculation of paper "demand" is the single largest contributor to price increases. The additional liquidity shoved into this market by hedge funds with minimal direct input into "price discovery" is huge, only a very ignorant person such as yourself would claim anything different.

Futures contracts are like Option-ARM mortgages for speculators, minimal capital deployment and maximum levered return. You put down a very small amount, while you may have to mark to market, it isn't always a huge deal, and realize huge levered profits. Since the capital is so small even a moderate hedge fund can afford to continuously bid up futures.

It may be a "zero sum" game, but when you also can profit off the physical market in return, it isn't zero-sum.

What's laughable is that even in the face of overwhelming evidence that the market is rigged for the benefit of the few, you still blame supply/demand. Exxon's own CEO said that the market is effectively 40% overpriced right now. The 60-70 price IS supply/demand, the rest of it is levered paper supply/demand.

He's also probably hedging a bit. Considering oil went from 60 to 144 to 40 within the span of 24 months with the bulk of the major movements in less than 12, you come to see that they weren't taking a $20 loss on the back-end of that, nor were they completely flat on the front-end.

As far as 6%, please. As with anything else, supply/demand is based upon price. Peak oil is a joke.

I've been thinking about how the exchange is trying to "reign in" via higher margin req. Let's assume we raise the margin req to 100%, or hell ban hedge funds altogether, what's to prevent BP Energy LLC or Shell Energy LLC from using their accounts to "price discover"? Since the market is relatively small and thin and demand relatively inelastic, couldn't they just do the same thing the hedge funds are doing?

 

[bfdd]

Isn't OPEC price target 85 bucks a barrel?

Most of the time and to be honest as far as I can tell they haven't really been the ones fucking around with oil prices this time around. Their production is up and steady, the big oil corps are far more to blame. Though a few years ago OPEC definitely had a hand in it.

 

[bfdd]

You sure proved the CEO of Exxon wrong that the market price would be $60-70 if not for speculation, by posting the ridiculous $3 comment.

So why is Exxon keeping the price up? I agree with him on what the price should be at, but the oil companies are bullshitting us if they're trying to point the finger at speculators right now.

 

[Craig234]

Is the declining value of the dollar part of it? YES.
Is speculation part of it? YES.
Is market supply and demand part of it? YES.

You can't say only one of these forces is the only reason and ignore the rest.

You can say one of them is wrong and can be fixed with regulation. The value of the dollar is a different issue, supply and demand is a preferred way to price.

That does leave excessive speculation alone as an issue to fix.

It's like saying you lost $5,000 in the stock market, $5,000 when you were injured by a falling tree, and $5,000 when robbed, so you can't just single out the robber.

Ya, you can, as the one that's wrong in need of action (arrest) different than the rest.

And by the way, supply and demand is not 'part of' the price increase. Supply is up and demand is down, so supply and demand would lower the price.

 

[WHAMPOM]

Seen as people all blamed Bush and his "oil buddies" last time for surging oil and gas prices, I guess we can lay the blame at Obama's feet this time?

Obama has "oil buddies?" Don't see him holding hands with Saudi princes.

 

[halik]

Thanks for the comment. Frankly, I'm not too familiar with where a lot of the big money is.

The Goldman comment was an aside about 'they're in the middle of that market, too'.

It'd be interesting to hear more about where various money is (e.g., sovereign wealth funds), but it seems our priority should be getting our government to represent us.

As LK notes, the biggest issue that institutional money and alternative strategies funds (the former via the latter ) are using commodities markets as inflation or liabilities hedges. So rather than price discovery, the market is being used an investment vehicle... at the detriment of the real interest.

You get that and the implicit leverage in futures - nymex CL contracts are ~12X levered currently and wonder why there excess volatility in these markets.

 

[halik]

So why is Exxon keeping the price up? I agree with him on what the price should be at, but the oil companies are bullshitting us if they're trying to point the finger at speculators right now.

How are the oil companies influencing the price of oil?

 

[Craig234]

As LK notes, the biggest issue that institutional money and alternative strategies funds (the former via the latter ) are using commodities markets as inflation or liabilities hedges. So rather than price discovery, the market is being used an investment vehicle... at the detriment of the real interest.

You get that and the implicit leverage in futures - nymex CL contracts are ~12X levered currently and wonder why there excess volatility in these markets.

I remember seeing that Wall Street pushed for and received changes to the rules that had required very conservative investments for certain money like pensions, allowing them to go into more aggressive investments and even requiring them to diversify into new investments, causing a bit of a stampede of big money into some markets and distorting them.