The Oil Scam Driving Crude Over $80

Let’s talk about the nonsense going on over at the NYMEX.

It’s not just the activity at the NYMEX that’s disturbing but the way the press, who used to be the kind of people who would check out a story, simply publishes whatever spin the wealthy sponsors and their PR firms feed them.

You can’t blame the media. The only word they love more than "crisis" is "scandal", but not when the scandal involves one of their advertisers. So, given the choice, they go with "energy crisis" over "oil scam" but let’s dig a little deeper than the average reporter….

The story you’ll hear for Monday is that oil rose $1.10 to $80 on tight supply concerns that drove prices higher.

The truth is that 257M barrels of oil for October delivery were bought AND sold on the NYMEX, which started the day with 197,270,000 barrels yet, strangely, suspiciously even, at the end of the day orders for oil to be delivered in October dropped to 171,442,000 barrels. How can the price of something go up while the demand for it goes down? COLLUSION. Collusion is "a secret understanding, esp. for a fraudulent purpose." Yep, that pretty much describes it in a nutshell.

If it were just the one day, we could brush it off as a fluke and consider our evidence circumstantial but here’s how trading went for the past 4 days since Tuesday, when I predicted that NYMEX traders had no intention of accepting the 289M barrels they had ordered for October:

In the Boston Tea Party, patriots dumped tea into the ocean rather than pay the taxes imposed by a distant king. On the NYMEX, they dumped 117M barrels that were scheduled to be delivered to the American people - BARRELS YOU ALREADY PAID FOR AT THE PUMP - in order to create a bogus shortage so you can pay record high oil prices to a distant sheik.

This isn’t just criminal behavior - it’s TREASONOUS!

“A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear. The traitor is the plague.” - Marcus Cicero

Look at what’s happening. I said on Tuesday:

I will tell you right now that these traders, including the 296M barrels that were bid yesterday to drive oil to record highs, HAVE NO INTENTION WHATSOVER OF ACCEPTING DELIVERY. In fact I will tell you right now that in the next 7 days, they will cancel over 220M of those barrels, which will then be measured in the October inventory reports as a "shortage" and they will then concentrate on rolling over the November contracts, currently with 248Mb on order at $76.26.

So what did happen? Well the traitors cancelled 117,558,000 barrels of oil, that’s 29M barrels A WEEK from October delivery in order for the weather girl on CNBC to be able to tell you every Wednesday at 10:30 how tight supplies are. And what did they do with those barrels? The same thing they do every month, they "roll" the contracts into the forward months, creating a false demand there for oil they never intend to accept delivery of and they have done it EVERY SINGLE MONTH FOR THE PAST 2 YEARS!

But, they are not done…

Were the traitors traders to accept delivery of the 171,442,000 barrels of oil that are still open today, BARRELS THAT THEY HAVE ALREADY BILLED YOU FOR, it would create the biggest glut of oil in US history and crash the oil markets. So these traitors traders will, in the next 4 days, CANCEL ANOTHER 130M BARRELS OF CRUDE and slip the majority of them into the next 3 months in order to create the perception that there is, simultaneously, a record demand and a tight current supply.

It is all smoke and mirrors and it all takes place on the open trading floor of the NYMEX and it’s costing the American people (at $80 a barrel) $1.6Bn per day, $11.2Bn per week, $48Bn a month - $576Bn a year. It’s a crime that’s committed right under our noses and the only way to stop it is for you to get mad!

Unlike Howard Beale in Network, I DO want you to write to your Congressman and I do know what you should say. Tell them you are as mad as hell and you’re not going to take it anymore! Send them this article and tell them to LOOK. Don’t take my word for it just start to watch, have an aide make a chart and keep track. Call a few traders in to testify and explain the logic of their actions. Ask why we are being charged for oil at "front-month" prices when they manipulate the front month contracts by ordering barrels they have absolutely no intention of accepting delivery of.

Ask them who gives the orders, ask them who signs the checks - FOLLOW THE MONEY!

Speaking of Exxon, that company’s market cap jumped back up to $495Bn again and may touch the magic $500Bn mark again tomorrow so let’s see if they can hold it despite the fact that refining margins, which saved them last quarter, are down over 30%.

Exxon is the world’s most valuable company. They don’t cure cancer, they don’t feed people, they only employ 106,000 people - 1/4 McDonald’s 465,000 (market cap $65Bn), 1/3 of Sears’ 352,000 ($18Bn), less than 1/2 of Home Depot’s 247,000 ($70Bn), 30% less than P&Gs 138,000 ($212Bn), a little more than 1/3 of GM’s 280,000 workers ($20Bn) and just over Pfizer’s 98,000 (167Bn). So we richly reward the company that rakes in the most money - through whatever means necessary, while employing relatively few people…

Is this the map for America’s future?

It’s a microcosm of what’s going wrong with our society. Manufacturing jobs are shipped overseas and XOM gains over $300Bn in market cap since 2002 without hiring more workers or producing more oil - it’s the same people, doing the same work for MUCH more money. How much more? In 2002 XOM billed us $200Bn for their products. In 2006, they produced 5% LESS product and billed us $165Bn more ($365Bn) for it and their operating income jumped from $17.5Bn (8.7%) to $67.4Bn (18.5%).

That’s right, they raised the price of oil from $30 a barrel to $80 a barrel, costing the American people over $500Bn a year in retail product prices in order to make an exta $50Bn. God bless us, everyone!

"War is when the government tells you who the bad guy is. Revolution is when you decide that for yourself."

Comments

[Malkiel:]

William Jennings Bryant lives again, crusading against the commodity market the way Jennings' farmers used to believe evil Eastern commodity traders were colluding to steal their crops. The commodity traders do what it's logical for them to do to make a profit within the rules of the market; if there
is genuine collusion, let the market and FBI investigate it; let Congress regulate it; but let's not draw ridiculous far-reaching conclusions just because the commodity traders are using the rules to profit after absorbing all the risk the public has been relieved of...

2007 Sep 18 01:04 PM

[A:]

Wow - what's next? Black helicopters?

It's really very simple. Supply and demand. Demand is climbing, supply has been flat for three years. Everything else is just noise. Just take an objective look at the EIA data (unless of course you think they're also in cahoots with the NYMEX traders, the government, big oil and the Easter Bunny) and the trend is obvious.

But of course, if the facts get in the way of a preconceived notion, just find some numbers that can be shaped to your call it a conspiracy. Because heaven forbid you couldn't possibly just be WRONG.

2007 Sep 18 02:51 PM

[revas:]

The author, who seems to be totally unfamiliar with the workings of futures markets, is welcome to his misconceptions, but does not deserve space in this forum.

2007 Sep 18 03:26 PM

[Uncle Bill:]

All his posts are filled with noisy rants like this. But go to his website and he's rarely wrong on a trade. The last thing he's doing is Seeking Alpha.

2007 Sep 18 07:58 PM

[Greg Pinelli:]

I've been down this road with Mr. Self Important before..he couldn't answer any of my previous criticisms of the garbage he writes..and he won't answer anything legitimately this time either. Futures markets are driven by moment to moment decisions. NO ONE..I repeat no one..takes delivery on the futures markets. Mr. Davis' outrage is nothing but a front for his phony self promotion.
Oil/Gas are going substantially higher because of fundamentals. My advice...slam this loser everytime he writes his over inflated nonsense. Buy oil/gas Closed End and Exchange Traded funds when there are dips..and wait for the numerous things that are telling everyone..except this clown...that higher prices and profits are coming.

2007 Sep 18 08:42 PM

[Philip Davis:]

Evil Eastern commodity traders WERE colluding to steal their crops!

Revas, I would love to hear your take on why 270K contracts were traded today netting a drop of 48K open (1/3) leaving just 123Mb on order. Who benefits from all the buying and selling when they all know they are paying a premium for contracts they absolutely need to cancel on Thursday?

If there are absolute long-term supply and demand issues in play here, why can you buy a barrel for under $75 anytime after next June? Also, why don't people - not airlines, not car companies, not industrial users... If I could buy options on XOM (and I don't even like them) for $13 less than the market price now for delivery in 2015, I'd pretty much just do that and retire - yet no one wants $69 barrels of oil for Dec 2015?

2007 Sep 18 10:59 PM

[Vladimir Se...:]

I know you DO know the difference between an option and a futures contract. So why are you trying to make a point comparing options on XOM with a futures contract? That just makes you look silly.
Crying foul when prices move against you also makes you look silly.
Being an oil bear doesn't make you look silly. You can believe whatever you want to believe and place your bets based on that, that's cool. The more believers/gamblers we have, the more liquidity, they tell us. And the more liquidity, the cheaper it is to make bets and the more efficient the system is supposed to be, or so they tell us. I'm not necessarily a believer in that, but that's a different story.
But when you made your bet and then something doesn't go your way you have to accept that either you were wrong (abandon position) or . . . the rest of the world is temporarily insane (keep betting against the world). It doesn't matter how many contracts cancel. They always did, do and always will. When you try to make a story out of it and try to convince the world that it is insane based on that "news" it makes you look almost as ridiculous as when you argue that backwardation is illogical because . . . of something that had to do with options on XOM. Not quite as ridiculous, but you know what I mean.

2007 Oct 27 01:27 AM

[User 107648:]

The rising price of crude is a perfect example of a market system working exactly the way it is supposed to. Oil reserves are a finite resource and as demand rises the price also rises. Rising oil prices encourage consumers to reduce their consumption and also provides an incentive for the development of alternatives. If oil prices were held artificially low then we would run out of oil much quicker than we otherwise would and when we did run out our alternative energy technologies would be more primitive than they otherwise would have been had we allowed the market to work properly.

2007 Sep 19 01:46 AM

[msg:]

This gentleman has no concept at all of the function or purpose of physical commodities markets. Does he understand consumers and suppliers hedge in the futures markets with no intention of ever taking physical delivery?

Wow, he predicted that open interest in the delivery month is going to go down and rolled to deferred months! Amazing!

Market participants roll from the delivery month to the second month in EVERY futures market, from bonds to beans to euros, thereby transferring open interest to a contract not subject to delivery.

To equate open interest with "orders to be delivered", and a reduction in open interest as "canceled orders" is ludicrous.

Please, take a basic commodities course offered by any futures exchange, or speak with a 1st year staffer at the CFTC and you will realize how ridiculous this treatise sounds.

2007 Sep 19 02:05 AM

[Aquater:]

Very clear counter-point, well articulated. Better than ranting one way or the other. This kind of logical explanation is more useful than noisy spitting at the sun.

2007 Sep 20 01:11 AM

[anindya ban...:]

If i got you right, by barrels billed mean Open interest. Now it is a known fact that actual delivery volumes in futures market across the world is miniscule.Therefore, Nymex is no different. A futures market is place of price discovery and not a alternative to a physical market. It is fact that if 200 million barrels of deilvery is accepted then it shall create massive glut. However, at the same time, somebody has tohave to have that much oil to give delivery. I agree with you that monet flow is adding to prices but it has to eb understood what is causing that. Irresponsible spending behaviour from Governemnt and ultra-loose monetary policy from Central Banks, creating massive growth in money supply(inflation). Where shall the money go, they are moving into various asset clases in search of return and here oil is no different from the CDO that the money buys. Therefore, in order to prevent money from chasing oil ike this way , we have to seek government res-straint and discipline in Central Bank Community. Problem is inflation is like "frog in warm water episode": FROG ENJOYS THE WARMTH INITIALY AND BECOMES CAREFREE OF THE FACT THAT WATER SHALL SOON REACH BOLING POINT. Here the warmth is inflation and we are enjoiying as we see our investmenst grow in value and it we shall continue to do it as long as we do not realise how our purchasing power getting eroded. The day we recognise it, we shall react, Bonds hall collapse and asset classes shal, deflate.... so shall your OIL PRICE...

2007 Sep 19 02:57 AM

[User 96432:]

your spelling is bad

2007 Sep 20 02:19 PM

[oiltrader:]

Looks like somebody's lost a lot of money going short on crude oil :))

2007 Sep 19 03:22 AM

[oiltrader:]

Please remove this financially illiterate reincarnation of michael moore from a reknowned site like seekingalpha. As an oiltrader, I'm apalled at how seekingalpha could print bs like this. The author obviously has no idea of how commodity markets work. The arrogant illiterate is especially unaware that ALL MARKETS have players other than hedgers called speculators who provide the liquidity necessary to lubricate day to day trading and who have no intention of taking delivery at expiry. Davis obviously doesnt know the meaning of the terms open interest,rollover and the fact that open interest in crude oil(and lots of other commodities) has exceeded the physical demand by a factor for years. Is there a way to rate an author/article on seekingalpha?

2007 Sep 19 03:29 AM

[Sr. Pessimist:]

So they make the purchase and then cancel part of the order, which artificially constrains supply. Again. Maybe there should be established a nonprofit vertical oil company that is there for the good of the people? Buy the crude barrels on Nasdaq, refine the oil, and then sell it to gas stations, undercutting the criminals at Exxon and wherever else. Exxon is run by the same criminals who continue to refuse to pay environmental disaster damage awards in the Alaskan Valdez oil spill to Alaskan fisherman, if I'm not mistaken. $5 billion worth.

2007 Sep 19 09:15 AM

[Mmarrkk:]

Mr Croner: exactly when did Exxon become criminals? I believe the damage award you are referring to is under appeal. In the U.S., we have a system of laws, courts and routes of appeal. When an award is granted, we all have a chance to appeal the award and there are a system of courts to work through. That is exactly what Exxon is doing, carrying out their constitutionally defined appeals process. And you forgot to mention that Exxon spent billions and billions on the clean up effort. They fixed the problem caused by ONE EMPLOYEE and spent billions. They believe the award of punitive damages was not called for and a few courts have agreed with them. What exactly is criminal in this? Murders get to appeal their sentences for years and year. Why not give the same opportunity to upstanding, tax paying corporate citizens who have contributed more to this world than Mr. Davis?

And Phil, please, give it a rest.

2007 Sep 19 09:55 AM

[the_Bird:]

I'm going to join the chorus of folks asking why someone who clearly does not understand how futures markets work allowed to publish a piece about the futures market on seekingalpha?

2007 Sep 19 10:39 AM

[jonreagan:]

This is on a par with the 9/11 conspiracy theories; just last week, Castro was telling us that a plane didn't really go into the Pentagon...it was an inside job.

Suppose there was some credence to this supposed nefarious plot. With the 2008 presidential race in full swing, wouldn't you expect one of the Democratic contenders--maybe Gravel or Kucinich--to raise the issue, in an effort to break out of the pack? Given the voters' anger over high gas prices--let's face it, this is something they relate to--I can't think of a more potent issue politically.

If they don't, I guess we're just destined to be crucified upon a cross of oil.

2007 Sep 19 01:05 PM

[shiboke:]

I'm long on 2 lots of NYMEX December oil, and this makes me a traitor. Thanks loads. How am I supposed to hedge against higher oil prices, keep 1000 barrels of oil in my back yard?

In other countries, price is controlled by nationalizing the oil companies. Is this what you want? Nationalize Exxon? Sure, they are a bunch of pirates, but they (unlike the federal government) actually know how to produce and distibute the stuff!

Exxon doesn't cure cancer or feed people. BUT, they sell the drug companies petro-chemicals, they sell the farmers the diesel to grow the food! They sell you the gas you put in your car, and they sell the utilities the fuel to make the electricity to run the network that allows silly people like you to rant on about, well, whatever. You may not like it (I don't), but without the oil companies, life in this country stops. Without the oil they produce, we have a 19th century lifestyle.

If you want a traitor to go on Capital Hill and explain himself, my email address is shiboke(replace with an ampersand)gmail.com. I'll give them an earful. In the meantime, please pull your head out, get some oxygen, go learn about futures markets and oil, and then write something. Learning something about a topic before you write about it makes your prose more effective

2007 Sep 19 02:28 PM

[adave24:]

Why do these traders/traitors care if the price of oil goes way up or way down because they can make just as much money if the price goes down (by shorting it) as they can if it goes up. All they care about is knowing what direction the price is going to go in. Right?

2007 Sep 19 03:16 PM

[udontsay:]

With appropriate respect and understanding, this is errant twaddle espoused by what appears to be a moron.

2007 Sep 19 03:36 PM

[saifl:]

There are many varieties of oil that trade only on the spot market. There are no futures contracts and there are no speculators. And quite often they move differently than LSC on Nymex and have no fixed differential to LSC on NYMEX. ALL of those are up.
here,
www.upstreamonline.com...

As far as the rest of his comments..well there are a log higher speculators in the stock market than in the commodities market, I guess DOW jones should be at 1000 by the same logic.
And BTW the #%#% dodo should see what happened last friday with the Commitment of traders report before shooting is retarded mouth off. Speculators increased their net short poistions by 10,000 contracts as crude rose from 74 to 78.

2007 Sep 19 05:24 PM

[DirtSimple:]

Even tho this sample of drivel is far from what I otherwise like to follow on Seeking Alpha, I always kind of enjoy Phil's mindless ranting .... only this time I was exceedingly disappointed ..... he didn't blame it on Bush! ...... But I was able to smile anyway!

2007 Sep 19 09:13 PM

[Philip Davis:]

I'm just going to say this once and nicely:

I know how commodity trading works, the question is whether is SHOULD work that way. You say this is normal and meanwhile we have a massive commodity bubble but, unlike most commodities, the physical delivery of barrels to Cushing, OK is the basis of the weekly inventory report - hence the scam.

It's not complicated, call it what you will but the gist of it is they churn the stuff like maniacs creating an artificial demand then cut the delivery to the bone to create an artificial shortage and then roll it over to the next month and do it again. The fact that some of you may trade along with the pros and make some easy money doesn't mean they system is "honest."

And no, not all contracts trade like that, heres a link to gold but you can click on any other contract other than gasoline, oil and natural gas and you'll find that this behavior is truly unique to the NYMEX pump crowd.

Notice the Volume of trading vs. open interest, nothing even comes close to crude by a factor of 10!

futures.tradingcharts....

2007 Sep 19 09:42 PM

[oiltrader:]

Philip "Middlename=moore" davis,
Taking your specious logic forward, the NYMEX traders were incorrigible patriots when crude oil was in contango(i.e. near month contracts were priced lower than far month contracts) since they were willing to sell you oil at lower prices in the near term. The phenomenon you have written about is a result of crude oil being in backwardation(look up any advanced spreads article on google Mr. Dont-do-any-homework for the meaning of this). Crude oil has been in contango of over $1 for the better part of the last four years(sometimes by over $2 a barrel). So anyone long on oil and rolling over positions would be losing over $1 A MONTH. Does that make traders with long positions in a contango market patriots and the same traders traitors in a backwardated market????

I'm pretty sure you didnt understand a word of this. Please take some time off and take some elementary finance and trading courses .

2007 Sep 20 08:07 AM

[kdo:]

Actually, I am definitely someone who knows nothing about the futures markets, so here's my question. When the contract is rolled, there has to be a buyer on the other end right? What is the process by which the forward contract is canceled w/o delivery to the new buyer? I would think that a whole lot of selling of the forward contract as it comes close to expiry would depress in price right before expiry and the market would anticipate it as it happens. What am I missing? Is NYMEX buying and selling, so acts as a market maker and only ensures delivery of what ends up being outstanding?

2007 Sep 20 12:19 AM

[Philip Davis:]

NYMEX traders take regular advantage of EFP (Exchange of Futures for Physicals) where the buyer or seller may exchange a futures position for a physical position of equal quantity by submitting a notice to the Exchange. EFPs may be used to either initiate or liquidate a futures position.

Anindya makes a good point. If they actually accepted delivery of the barrells it would cause a massive glut and, conversely, their refusal to accept over 90% of the barrels that are "demanded" at the beginning of the month, month after month, have caused a pointless, artificial shortage in Cushing. Those contracts are binding, which I do doubt that anyone can deliver the all of 358M barrels that are on order for November, last month's settlement of just 29Mb has now given us 3 consectutive weeks of drawdowns in the Wednesday oil report, each of which has pushed prices significantly higher. There are, in fact, just 48M less barrels (out of 1.7Bn) of oil in the United States right now than there was last August, which is about right with OPEC cutting production 1.5Mb per day (another artificial shortage we just accept).

www.eia.doe.gov/pub/oi...

2007 Sep 20 05:49 AM

[oiltrader:]

Mr Know It All,
Had you bothered to check historical data(even for the last one year) you would have found that oil prices dont really move according to weekly DOE and API figures. In fact, there have been many weeks in which prices fall on thursday and friday even though the data showed drawdowns. A bigger factor at play here is the dollar depreciation. Anytime the dollar weakens for an extended period of time, crude oil shoots up.

Please get yourself a bloomberg terminal and do some regression testing before making a mountain of a 4-week old linkage between inventory data and oil prices.

In the meantime, do us a favor and stop writing.

2007 Sep 20 08:26 AM

[maximax:]

Enter your comment hereMr Davis, welcome to the world of oil. May I wish you the very best of luck analysing oil data, as it is frought with inconsistencies. Here is an absolutely shocking example: OPEC consecutively announced cuts totalling 1.7 Mn b/d but never really complied with it (reductions were made, but not to the full extent). Not that anyone exactly knows how much the OPEC countries are exporting, but the common estimates (based on tanker watchers) point to consistent non-compliance. Some OPEC members more so, some less. But maybe you do not really want to base your analysis on evidence, but on a desired outcome. Wrong pitch dude, wrong pitch. People here make their living in the markets, how can you expect to find willing henchmen on this site for your political purposes?

2007 Sep 20 10:01 AM

[maximax:]

Enter your comment hereMr Davis, welcome to the world of oil. May I wish you the very best of luck analysing oil data, as it is frought with inconsistencies. Here is an absolutely shocking example: OPEC consecutively announced cuts totalling 1.7 Mn b/d but never really complied with it (reductions were made, but not to the full extent). Not that anyone exactly knows how much the OPEC countries are exporting, but the common estimates (based on tanker watchers) point to consistent non-compliance. Some OPEC members more so, some less. But maybe you do not really want to base your analysis on evidence, but on a desired outcome. Wrong pitch dude, wrong pitch. People here make their living in the markets, how can you expect to find willing henchmen on this site for your political purposes?

2007 Sep 20 10:01 AM

[User 107991:]

I find it impossible to believe that anyone who has spent more than 10 minutes trying to understand futures markets (long enough to manipulate/retitle those settlement, volume, OI tables above) could have come to this absurdly ridiculous set of conclusions. So either the author is deliberately attempting to stir up anyone who doesn't have any clue, or is simply the stupidest person I have encountered to date.

2007 Sep 20 12:44 PM

[huangjin:]

Why wouldn't an actor step into the market, buy all those contracts, and then demand delivery? The Chinese are looking to fill an SPR, and the U.S. could always move to add. Both governments would have strong interest in lowering oil prices. Anytime there is a massive artificial bubble it is possible for a smart, well-funded trader to destroy the position of the bubble blowers. The only time they cannot fight the market is when it is pushed by a real force, in the case of NASDAQ stocks, housing, and oil, I offer cheap money as the culprit. Unfortunately, unlike stocks and housing, people won't suddenly change their oil consumption, because as you said, there aren't huge speculative positions in physical oil. Goldman Sachs doesn't have a 300 million barrel SPR hidden in Ohio.

2007 Sep 20 03:09 PM

[michaelschn:]

The article is all wrong. Oil prices don't change. It's $US going down. $US is worth less than 1/80 of a barrel today. It will go further down. It's been actively devalued. When they bailout housing bubble $US will quickly decline. The proposed Fanni Mae / Freddy Mac cup adjustment means devaluation of $US from 1/427000 of the top insured mortgage to 1/625000 of the same real thing. This is a value inflation of 46.3%. Price inflation of other real things must quickly catch up.

2007 Sep 20 06:53 PM

[michaelschn:]

The article is all wrong. Oil prices don't change. It's $US going down. $US is worth less than 1/80 of a barrel today. It will go further down. It's been actively devalued. When they bailout housing bubble $US will quickly decline. The proposed Fanni Mae / Freddy Mac cup adjustment means devaluation of $US from 1/427000 of the top insured mortgage to 1/625000 of the same real thing. This is a value inflation of 46.3%. Price inflation of other real things must quickly catch up.

2007 Sep 20 06:55 PM

[Carl leason:]

I have to admit that I have never seen so many comments, below, where everyone is an "expert " ! Most of these guys talk about the oil market manipulations but forget about all the BS that goes on daily in the prices of every stock and market ! A "gap-up" or a "Gap-down" is simply insider trading. It's not legal but everyone does it ! Unless you are Martha Stuart ! Even Bankers do it with manipulations of the rate of exchange.
Company's and traders are all in it for the money,..period ! You can criticise the Company's but can't take the flack you get back,...you guys are all just angels , right ?
Most of you complainers need to get a real education and not just explore ideas and try to place blame. If you think you can get away with something and make a buck, You are going to do it !!! Cl

2007 Sep 20 07:38 PM

[kompukard:]

I am a Nymex trader and 1 of many who take place in this orchestrated environment that has cleverly been put together to appear open and free of manipulation.......how... you are correct in your assessment except for 1 point regarding the rollovers...........I have been trading for 10 years and this technique is used by speculators all the time to move out to the next month.......any independent trader I know all say the same think......the market is controlled by a few large hege funds and banks like Goldman Sachs and a few Banks out of Switzerland who I believe are fronts for OPEC nations that trade of off inside information........the... banks are usually on the right side of the market consequently when they buy I buy......when they sell I sell.......its worked so far

2007 Sep 20 08:51 PM

[kompukard:]

you can also look at the OPEC "cuts" they said last year they would cut by 1.7 million BPD and this has sent oil on its upward trend from about 50 bucks.......well only people in the oil business now that the cuts were never implemented......OPEC has been producing way over the quota for as long as I can remember........And some nations are not even included in that number like Iraq and Angola.........so clearly there is manipulation.

2007 Sep 20 09:01 PM

[oiltrader:]

Kompu,
"only people in the oil business know that the cuts are never implemented"???? I'm an oil trader trading crude oil on nymex and ICE from India and I've been getting this info from multiple free sources(check out platts.com for their oil headlines) for the last two years. These pieces of information are available to anyone willing to do a little bit of homework and willing to use a bit of brain to analyse that info. And, Iraq is excluded because of the unreliability of its supplies(Iraq's oil exports are STILL below the levels achieved during the invasion). Angola is a very recent member of OPEC and will be included in the quotas from early next year. I fail to understand how there is manipulation if all the information is publicly available to anyone free of cost ANYWHERE IN THE WORLD.

2007 Sep 21 02:48 AM

[kompukard:]

okay lets just say......hypotheticall... speaking that OPEC was going to announce an unexpected increase in oil in the face of a falling US dollar......on the surface of it it would seem like a loose loose scenario for OPEC and in particular Saudi Arabia.......the large dollar investment in America and in deposit are slowly loosing value and then they are supplying the world with more crude oil......this would seem bearish and would tend to be not supportive of higher crude prices........what is stopping Saudi Aramco through the use of well know proxies to buy the front month crude on the IPE.......taking an extremely large position.......then the information quickly carries over to the NYMEX where people are just standing around looking for direction......not caring which direction as long as oil moves.......then Goldman enters the market buying large positions in oil.....then everyone else starts to pile on pushing oil higher and higher..............is this scenario plausible? If you asnwer yes to this question the there can be no other concusion then there is some for of manipulation occurring in the world oil market......and let us not forget that the price of oil is essentially controlled by OPEC anyways........so if we have a cartel formed to control the price of oil does it not make sense they would use all the means at their dispose to enforce their mission statement?

2007 Sep 23 06:39 PM

[oiltrader:]

Like you said, OPEC probably does use fronts to trade the oil markets. But you forget that the price of oil is controlled by OPEC because OPEC has most of the SPARE CAPACITY of oil. OPEC exports only about a third of the world's oil(and produces even less than that). So the potent weapon in their disposal is curtailing/increasing their oil production, since its the marginal oil production that affects the oil spare capacity. Lets take a hypothetical case where OPEC goes and buys front month IPE(or even Nymex) crude. If the OPEC-traders-Goldman Sachs cartel buying pushes crude oil to high enough levels, other oil producers(remember OPEC accounts for only a third of oil exports) would jump in and sell futures. Like there's nothing stopping Saudi from using fronts to take positions, there's nothing stopping Russia(which anyway has been willing to sell oil at any price for the last five years) from using fronts to sell futures. In short, the futures prices will again stabilize at the "fair" value as deterermined by all market players. And dont forget, these non-opec producers can use spreads to lock in their prices for months down the line too. Plus not all blends trade at the same price - IPE brent has started trading at a discount of over 3$ to WTI after trading at a premium of $3-6 just a few months ago. This shows the effect of the non-financial market players(those who have taken advantage of high prices to sell brent futures to lock in their prices). If you look at the spreads, WTI spreads and gas oil spreads are in deep backwardation(front month outright trading at premium to far month) while brent spreads have been trading around zero. This shows that their is a genuine shortage of crude in the NEAR TERM at cushing(delivery point for nymex WTI). The fact that far months are trading at massive discounts(over a dollar) shows that market players do not expect this shortage to last for much longer(after the OPEC production increase). The backwardation in gas oil could be due to people rushing to secure supplies for the winter. My point is that the oil markets are too diverse(have many contracts - brent,wti,gas oil,gasoline,heating oil and strategies like spreads,options etc) and widespread(any oil producer, refiner,retailer can trade in the market) to be manipulated for any extended period of time(more than a few hours) by anyone since a fairly cohesive cartel of the biggest oil exporters accounts for only a third of the oil exports.

2007 Sep 24 02:59 AM

[kompukard:]

okay just look at yesterdays and todays price action.....the EIA numbers came out and were completely bearish for Oil and gasoline.......didn't matter oil made a complete turnaround and moved 2 bucks at the close.......the in electronic trading it moved another buck.......so thats 3 dollars from 2PM to 9AM eastern standard time.......why? Well the news organizations tell you there are 2 storms that might enter the gulf of Mexico and might effect production........well professional traders maybe like yourself use DTN and get updates on all weather activity everywhere in the world that might affect production anywhere in the world........and we all now the TD13 is forecast to move WEST and Karen is turning north and will miss the US by hundreds of miles........so why the runnup in oil?????? I does not matter what happens in the real world.......oil is going up for now until a few large players decide it is time to short.....this is the oil market and this is how I play it.

2007 Sep 27 09:49 AM

[silverharp:]

I dont understand his point. Oil is fungible so if oil is being turned away from US ports then there will be a glut elsewhere. I live in europe and petrol is not getting cheaper at the pump even though the euro is increasing against the dollar.

2007 Sep 23 07:58 AM

[geologist:]

Would be much more interesting/convincing if the author would plug in how the world demand and actual supply/production of curde oil fits into the futures market and the price of crude. First qeustion i would like to know is if the author knows taht we are really in a shortage of crude on a world wide basis ..... there is plenty in storage/inventory, but at the rate the world uses it, the inventory is insignificant. Second question would be doesnt the author think that Exxon has viable crude prosepcts they could drill that are worth the effort in terms of actually adding any meaningful reserves ---- he sounds as if he thinks that Exxon could use their Captial to go out and simply drill and find significant reserves at anytime they want to ..... I have been afraid to invest in the company due to knowing that they cannot replace reserves due to a lack of new prospects to drill (me, along with many other prospect geologist who know the world energy situation. Regards, DRP

2007 Sep 24 04:01 PM

[By:]

AUTHOR HAS TAKEN A LOT OF ROTTEN EGGS AND A LITTLE SUPPORT, BUT NO ONE HAS ADDRESSED HIS ASSERTION THAT SLIPPAGE OF ORDERS TO DELIVERY IS TEN TIMES THAT OF OTHER FUTURES MARKETS. TRUE OR NOT? IF EVEN CLOSE TO TRUE, WHY? AND IF WE DON'T KNOW WHY, SHOULDN'T SOMEONE INVESTIGATE?

2007 Sep 25 10:18 PM

[Greg Pinelli:]

Mr. Self Important has a perpetual conspiracy case to grind..and grind he will. Oil is above $90 because of fundamental reasons
he simply can't fathom. This sounds very much like the conspiracy theory garbage promoted by GATA concerning gold. This is an attention getting device that gives second rate losers a platform for parading their egos around. Oil is...for the umpteenth time..higher..and going higher because..
1. OECD and OPEC countries can't supply more without severly stressing fragile and already overtaxed infrastructure
2. These suppliers..take your pick..are dedicating more oil to domestic markets (Mexico, Russia, etc etc) and are not about to cause political turmoil by denying local users
3. Futures are bid up because the predictability of supply is scaring the hell out of users who must have..and they are going to go out (in time) to secure that supply
4. Oil majors are scrambling..and investing BILLIONS..in alternative avenues of energy because their days are numbered as straight oil conglomerates. The real money is being made by State actors.. THEY CONTROL 70-80% OF THE WORLD SUPPLY. Exxon is small potatoes in this nation state game....
Cheap suit..Michael Moore type pandering...5th grade level analysis and geopolitical savvy...congrats Davis you hit the trifecta.

2007 Oct 27 08:45 PM

[Sr. Pessimist:]

MMarkkkk- Exxon became criminals the minute they became involved in the United States oil industry.

2008 Jan 10 01:09 AM

[defiantone:]

This is all above my head because I found this on a larf looking for information on the nationalization of the oil industry - I was just looking to see what brand of chatter was out there -

I've got to say - this article, and the discussion/flame war that ensued was hilarious! keep the comedy rolling!

2008 Mar 23 08:27 AM

[LawMichigander:]

Something that no one ever explains is that if it is all supply and demand with so much demand from China and India. Why do China and India pay under $2.50 a gallon for gas and we pay $4.10. We now pay more for gas than people in Europe do. Once you remove taxes, we in the U.S. pay more for gas itself than anyone else. So if it was all supply and demand and there wasn't enough supply then China and India would be having shortages because the sellers would prefer to sell to the U.S.

2008 Jun 01 11:23 AM

[market-master:]

Georealist - I disagree

The markets are generally very corrupt and manipulated, based on the greed factor. Goldman Sax is probably as bad as any of them playing both sides of the market and spinning the data so that they can pull down the most chips for themselves. There timing on their articles is suspicious and their analysis is flawed. I wish I could say that the price of oil was going to be up 15 % on average in 30 dayas and cause the type of increase they did. Give me a break. It seems the bubble just moves but the story never changes. .com .housing now .energy…. what’s next after this one pops.

2008 Jun 23 02:06 PM

[learn about...:]

We should know about futures markets before we initiate any trading decision.

2008 Sep 24 10:50 PM

[Kenny G:]

test comment

Jan 12 01:43 AM

[ajdoolittle:]

Reading this article in January of '09, it would appear that the author was RIGHT. Reading the comments above tells me that most of you are traders who were either part of the problem i.e. the futures scam game, or you just ended up getting caught with your pants down and were heavy into the futures yourself. Ladies and gentlemen: stop believing the media all the time. People are sheep. They always follow the crowd. You idiots who don't believe this guy deserve what you got!

Congratulations, Mr. Davis. You were right.

Former comoodities trader.

Jan 16 09:18 AM