Oil Speculators: Watch Out

Here is a shot in the back to all of these that traded and profited from the speculative run up in oil. I know what you are thinking…. “What speculative run-up? I thought they said it was supply driven!”

Just posted on Bloomberg:

OPEC and 13 Asian countries may call for measures to curb speculation in crude oil to prevent a surge in prices once the global economy recovers from the worst recession since World War II.

...Ministers participating in an energy roundtable in Tokyo may seek increased oversight of over-the-counter trades in oil and its derivatives, according to a draft of a statement to be released by the chairmen after today’s meeting, a copy of which was obtained by Bloomberg News. The document, which may change, calls for limits on speculative positions in oil futures.

...The Organization of Petroleum Exporting Countries unveiled a plan in January seeking regulations to cap speculative trading by investors who buy oil without planning to use it. Benchmark oil prices on the New York Mercantile Exchange soared to a record $147.27 a barrel on July 11 and have since plunged 65 percent to $51.55.

Comments

[capt Brian:]

Sure, why not. Let's allow all of our competitors have the edge like we did for the auto industry. Let's not compete properly on the same level, we need to start below the rest of the world 'cause it is not fair that we are so smart, and doing so well, it makes them look stupid.

And while we are at it, how about a law that even starting behind the starting line, as everyone else does, how about if we win we give the trophy (profit) to those who were not smart enough, quick enough or too challanged to have any brains. Too much inbreeding, bad childhood, crooked parents, and any excuse you can come up with is enough for us to share our winnings with those too stupid to win.

There, will that satisfy everyone,except those smart enough to go out and make a profit?


GASP, where the hell is all this coming from the NYT?

Capt Brian
Floundering again. HEY who is gonna give me the money back I lost in the market when companies lied to me?

Apr 26 01:11 PM

[wineo:]

That was all American government free market stuff. They sacrificed autos to sell other high margin stuff like financial services, jets, guns and bombs. Why compete in low margin autos when you got the best financial crooks, the best genetically modified seeds, the most immoral lawyers, the best jets and the nastiest bombs?


On Apr 26 01:11 PM capt Brian wrote:

> Sure, why not. Let's allow all of our competitors have the edge
> like we did for the auto industry. Let's not compete properly on
> the same level, we need to start below the rest of the world 'cause
> it is not fair that we are so smart, and doing so well, it makes
> them look stupid.
>
> And while we are at it, how about a law that even starting behind
> the starting line, as everyone else does, how about if we win we
> give the trophy (profit) to those who were not smart enough, quick
> enough or too challanged to have any brains. Too much inbreeding,
> bad childhood, crooked parents, and any excuse you can come up with
> is enough for us to share our winnings with those too stupid to win.
>
>
> There, will that satisfy everyone,except those smart enough to go
> out and make a profit?
>
>
> GASP, where the hell is all this coming from the NYT?
>
> Capt Brian
> Floundering again. HEY who is gonna give me the money back I lost
> in the market when companies lied to me?

Apr 26 04:38 PM

[HardwoodFlo...:]

The whole "leverage" or margin option in the commodities amrket was designed for people that actually purchased and use the prodcuts in the market (e.g. refiners, millers etc). The problem with the curretn system is that to little risk is associated. You have to look at it the way the LBO guys on wall Street loook at these propositions: waht is the down side risk. Well if you only have to risk 10% to make a gamble how great is the risk? i think the margin requirements should be raised.

The idea that oil inventories are at the elvels they are and pricing has remained relatively sound at $50 makes little sense to me. Remember the huge "contago" scenrio that was building up in Jan and Feb. Where is that oil now? Out ont he ocean. That stuff isn't even in the "system" to be accounted for interms of inventory. I'm no expert but i could see oil at $30-35. But what do i know i'm just a hick- but when things don't make sense they just don't make sense. Oil hanging at $50 makes little sense considering the inventory issues. Something has to give.

I don't want to destroy the price of oil- it should have a price like anything else that is determined bythe market. The only reason I think they should raise the margin requirements is that i'm tired of "investors/speculators" being pariahs on the American Consumer. Last summer they brought the country to it's knees- for what greed.

Remeber all the people talking their book: Goldman Saks saying oil would go to $240 and T-Bone Pickens saying the same.

I read somewhere that two guys from Stanford figured out that $11 billion could control World Wide oil throught the options market. What self respecting hedge fund didn't ahve $11 billion last summer?

Apr 26 05:52 PM

[Dustinian:]

I think that this is good news (though I am still skeptical as to what steps will be actually be taken).

If last summer demonstrated anything, it showed how many commodities the price of oil impacts, and how wide ranging the impacts of speculation on oil futures can be. A speculation cap would be positive, in my opinion.

Apr 26 06:42 PM

[icandoitdon:]

they don't have to limit the number of contracts. all they have to do is increase margin requirements to 50% for anyone but a producer or commercial user of oil whose sole intent is to hedge. that wipes out 90% of the speculative trading that has, in my view, come to dominate oil futures markets. it's too important a resource to be left to the whims of futures traders who don't give a rats ass about anything but capitalizing on price trends. let em trade hog bellies...it's more fitting.

Apr 26 09:42 PM

[The Greates...:]

The oil and gas industry are reaping what they sowed last summer, one could say they killed the goose that was laying the golden egg. Ah, for the days when all they could say was, it is supply and demand, and demand is running ahead of supply. Anyone here still believe that bogus story? They are currently paying tankers around $75,000 a day to store their oil hoping to create the same false market shortage, but when you made $476 billion in net profit over the last 6 years, you can do things like that.

Apr 27 10:25 AM

[toobad41:]

Stories about millions of gallons of oil being stored in offshore super tankers is bogus. It is not happening offshore to the United States.

Apr 27 01:35 PM

[Ferdinand E...:]

Limits on speculative positions in oil futures. Sounds fruitcake to me, and should be ignored.

Apr 27 02:05 PM

[Old Trader:]

Freya,

Maybe all of those oil-laden supertankers could be routed through the Gulf of Aden...ya know...just off the coast of Somalia? THAT should fix the "excess inventory"....(snark).


On Apr 27 02:23 AM Freya wrote:

> Don't forget those Hedges by Oil and Nat. Gas producers. Will this
> program destroy their ability to Hedge? Will the Cash flow from a
> hedging program be limited further to an already stressed Industry?
>
>
> "Lets limit"... lets sink those supertankers holding all that oil,
> its not being used. Lets Eliminate the SPR, Its not being used, or
> better yet, lets get rid of all the stored Oil. Who knows who bought
> it for what use. Maybe they are Speculators?

Apr 27 08:16 PM

[lefty37:]

The answer is simple and should cover all commodities.
The proper trail----- From producer to wholesaler, to retailer to user.
All the rest do is increase user price and create false supply facts.

Apr 28 08:03 AM

[WCP:]

Require settlement in dollars for all trades at the end of the trading day. Or execute all of the dirtbags involved in the futures markets. Both would have the end result of removing speculation in the most important strategic material on the planet! I for one would prefer the latter.


WCP

May 08 10:12 AM

[Freya:]

Don't forget those Hedges by Oil and Nat. Gas producers. Will this program destroy their ability to Hedge? Will the Cash flow from a hedging program be limited further to an already stressed Industry?

"Lets limit"... lets sink those supertankers holding all that oil, its not being used. Lets Eliminate the SPR, Its not being used, or better yet, lets get rid of all the stored Oil. Who knows who bought it for what use. Maybe they are Speculators?

Apr 27 02:23 AM

[Freya:]

Ah, a man of the sea, after me own heart.

Apr 26 02:18 PM

[Freya:]

"Limits on speculative positions in oil futures": this sounds great on the surface. (pun intended)

If delivery is taken, who decides what the intentions are? On the other hand, this would limit the capabilities of short sellers as well.

To me, it sure sounds like Opec wants greater control of Oil pricing.

Apr 26 09:31 AM