Posted on 08/21/2008 9:51:15 AM PDT by MichaelP
A few speculators dominate vast oil market Regulators:
Swiss energy firm holds 11 percent of contracts on NYMEX
Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses.
But when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising to the commodities markets was the massive size of Vitol's portfolio -- at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange.
(excerpt) for rest of article click on source.
Mike
(Excerpt) Read more at msnbc.msn.com ...
Speculators can only operate in a market that is suffering scarcity. Fix the supply problem and the speculators cannot speculate. Simple issue of supply and demand.
Speculators are a symptom of the problem not the cause. Simply economics fact that the hysteric whiners in the Establishment Media refuse to learn because it does not fit their Democrat Party Masters political template.
As long as oil, and other commodities are market driven and priced, there will be investors who accept the risks and buy the related securities.
Of course you don't take delivery, any more than you do with corn or pork bellies!
All investors are speculators! They bet their money on a play for it to rise or fall in price.
All this whine and cheese is just that......whine and cheese.
I guess the degree of ones speculation in oil futures is directly related to how much money they have to invest, and put at risk?
Sounds like a golden opportunity to me. If only I had some extra money.
Unless this speculator boogeyman is massively short the oil market, they have suffered a financial bloodbath the past month or two. Give it a rest...
I don’t think speculation is the root problem, but when some market participants are much bigger than all the others then it is likely the market won’t behave in the manner it should.
There are also speculators in stocks, real estate, bonds, etc. etc. etc.
Anyone who thinks otherwise is a dullard.
Where would capitalist America be w/o speculation?
It is really obvious who the bogeyman is.
What is never pointed out is that this works both ways - as in when the President lifted the Executive moratorium on drilling, the price went down (and the dollar went up).
A democrat congress led by the nose by environuts?
Count me as one.
First, I do not trust the objectivity of your source. Secondly, yesterday's WSJ noted that it was a reclassification of Vitol Group from commercial to noncommercial that sent the % of noncommercial speculators from 38% to over 50%. I call it technicality.
Fox news had a blurb a bit ago.... oil jumped $6 in 15 minutes, supposedly in relation to the tropical storm in Florida. Where is the logic?
The price fundamentals are supply based, and when there is fear that the supply may shrink in the future and demand will remain high, the investor(speculator) purchases long securities to profit from it if he/she is right.
On the counter side of the speculation is a guy who sees it differently, and goes short the market. For every buyer there is a seller and at times when there is high volatility and the price jumps either way, it simply means that the balance has been shifted to either the shorts or the longs.
The only entity that can actually cause a shift in price to the upside is a Nation State who may intentionally withdraw supply from the market, or in the other direction, flood the market with oil. This is not speculation, it is manipulation and the Russians have been guilty of this, in the minds of many yet it cannot be proved. For some reason, oil production slowed in Russia for a few months earlier this year. Not much press about it, but we were aware of it and they issued reasonable excuses.
The problem is that If a Russians mouth is moving, he is lying.
No, speculators can be quite successful in a market that is RESTRICTED. There is no scarcity of crude. The speculators may be a symptom, as you say, but there is manipulation going on.
Please, don't waste your time lecturing the forum on supply and demand. It's kinda been done.
That's the logic, and when you add a looming war to the mix with the second largest producer, you will have more long buyers than shorts. Subsequently you will have high volatility and a rise in price.
I don't call the speculator a boogeyman; but the speculator can die by the same sword he lives by. If only 4 individuals hold 33% of all contracts, their "moves" in the market can MOVE the market. As long as the US gov't remained on the production sidelines, these few speculators just kept bidding "long", that is, buying, thus exerting upward pressure on prices. The day Pres. Bush announced the end of the executive moratorium on offshore sources, the price bubble broke. That was these same speculators panicking (in an orderly way) by going short (to cancel out their positions, put in jeopardy by the psychology of enhanced supply).
Today, we have them jumping back in on the hopes that the psychology that led to a $35 dip has dissipated, and confident that Congress wil NOT do their part to augment the President's resolve to drill. If Congress WOULD step in and legislate drilling now, the price would go down to $70.
That is why folks who say that drilling NOW would have no effect for 10 years, so why bother. The effect is immediate, because the psychological effect grabs the few who hold so much of oil's future prices in their hands and causes them to take drastic measures.
Like the resolve against terrorists which followed 9/11, however, it must be sustained. In both cases, it has been the initial impetus provided by strong presidential measures, followed quickly by foot-dragging and dithering by the failure-seeking Congress.
That is what I MEANT to say.
"One trader held 11 pct of Nymex contracts"
"'Speculator' in Oil Market Is Key Player in Real Sector"
"Vitol ‘not in the business of speculation’" (Or so it claimed in May, 2008)
"Oil speculators dominate trading, driving up gas prices & exploiting gaps in govt oversight"
ping
Vitol is a -- maybe the -- classic case of misclassification. I should think their forced liquidation of contracts in excess of position limits is complete or nearly so.
Now, if CFTC would get after the BIG fish in the misclassified-spec game, we'd see some very serious results...but it's an election year, and they won't.
Ah, well.
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