Crude Oil Drops 40%...

MR TT1:

the OTC market is 500 times larger than the Nymex/ICE markets. You Can't Regulate that market because is a world wide one, You Can Find hundreds of traders buying and selling physical Oil & Gas from nigeria, oman, venezuela, ecuador, colombia, the US, Europe, russia and those trader won't be affected by a margin increase at the Nymex/ICE.

The OTC commodity business is a $516 trillion dollar Gorilla.
You really think that China or Marc Rich care about the Nymex margin?. They can arb and trade physical oil with HUGE credit lines from london through argentina without a problem.

BTW: The Nymex had been increasing their Oil and Gas margin like 10 times since 2003, but that didn't stop the Bull market.

this is not the sp500.
 
Where are all the commodity fund (CTA trend followers) and idiots like you speculating in? the OTC markets or the Exchange Futures Markets?

Exchange Futures Markets! Just look at all the open interest at NYMEX over 1,536,979 contracts that represents over 1.5 billion barrels of oil. Go fiqure!

Futures Markets are there for the Hedgers and
Speculators to participate in.
 
OK, I've tried to be decent . I expect the same from you.

FIRST of all The NYMEX contract is a physical one, in that being a pipeline contract delivery can be made for the one thousand barrels volume of a single contract. What Platt's assess is the same thing, albeit in its informal forward rather than futures manifestation. The only major difference is the timing of the quote, with Platt's assessing WTI for time in the hour after the NYMEX close. One could argue that linking directly to NYMEX creates an incentive to manipulate the closing price in the frenetic last few minutes of trading, but that incentive already exists as an way of influencing the information available to the Platt's journalists.

In the physical market, the pattern of world trade flows has changed. The US import gap has risen steadily, and now represents about of quarter of the volume of international trade in crude oil. Within that increase, the balance of US imports has shifted away from long-haul towards short-haul sources, and towards heavier crude oil. The Asian import gap has also risen sharply, while Europe's has contracted due to the steady increase in North Sea production. West African crude oil now occupies a pivotal position, and swings into all three of the main crude oil consuming regions according to market conditions.

For Brent, however, matters are more complicated. A major feature of the Brent market is that it works extremely well as long as one does not think about it too hard. Physics may say that the bumble bee can not fly, but the bumble bee does not think about it. Financial theory would not produce a design like Brent, but Brent traders should also not think about it. The market has in general evolved more through chance than design, and IPE Brent is the one formal element within in interrelated mesh of markets. While EFP provisions can be used, the contract is not physical. It is cash settled as delivery can not be made for the standard contract volume in what is a cargo and not a pipeline market. For Brent, the two markets are complementary, in that the futures market relies on the forward market to provide a physical grounding through the construction of the IPE index.

In general terms, the futures markets set the level of prices, and the physical markets set the differentials.


Companies like Glencore, Trafigura, Lukoil are The BIG BOYS in this industry, Not guys like you and Me (or those CTA funds jajaja).

Thid industry is extremely complex, again, The Nymex had been increasing their margins every other month since 2003.. ( like you suggest)
 
By any chance do you have access (or have knowledge) of worldwide inventory/supply/demand/etc. reports other than the EIA [which is US only] ?? I'm curious to see the European, Chinese, Japanese supply/demand picture ...

There's a lot we don't see from our US centric view.
 
rubibondoo7 I ment no disrespect to you!

However, the amount of money that speculators (long only funds) and the like (not hedgers) has poured into this market in the last 7 years is simply huge! They made huge sums of money being long the defferds at the start of this bull run.

Too simply require them to put up $5,250 per contract is absurd right now!

My main point in the beggining of this thread, was that raising margins would simply cool down the speculative excesses of this market. Forcing some players to hold less contracts and thereby reducing demand for the contracts.

Hypothetically, If you run a $500 million fund and Oil represents 40% of that fund at current margins you would hold 38,000 contracts long if you are Bullish. If the exchange raised your margin requirements to say $50,000 per contract, all things being equal you would hold 4,000 contracts. You would be forced to sell 34,000 contracts. What would youthink would happen to prices if all the players had to do this?

Prices would collapse. Look what happen to Comex Silver in 1980
 
Quote from TT1:


However, the amount of money that speculators (long only funds) and the like (not hedgers) has poured into this market in the last 7 years is simply huge! They made huge sums of money being long the defferds [sic] at the start of this bull run.
More...

The long only investors that indeed have put large amounts of money in commodities aren't buying on margin son.
 
Quote from TT1:

A coordinated effort by the Fed and Finance ministers around the World requiring Futures Exchanges (nymex and others) to raise the margin requirements from 5% to say 30-50% of the nominal contract value would help take the speculative bubble out of this market. Crude Oil would fall 40-50% in short order!!!

Currently, it only take $5,250 in margin to control 1 contract at the NYMEX.

Raise margin requirements, see Crude Oil drop!

Yes, it would hurt the Exchanges as far as volumne is concern, but come on, all these guys have being making obscene amounts of money the past 7 years!!!
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I have seen this suggestion in a number of recent posts and discussion threads.....

it probably has gained widespread discussions in other forums and economic think tank discussions....
 
Quote from jeb9999:

Oh great, another financial genius. How do you know that raising the margin requirements on oil to 50% from 5% wouldn't force all the shorts out and jack the price up 100%.
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I guess you weren't around when the COMEX got a phone call from the White House and went to 100% margin and screwed the Hunt Brothers royally. Can you say liquidation only?

Sure.
I knew ya could!
:D
 
MR TT1:

I understand you'r point, But for most of the Physical traders out there, 10k margin is like a drop in the water, Only Glencore have a 200 billion usd turnaround anually, they Only use the Nymex/ICE exchange to hedge their position.

In fact traders like Glencore don't even pay for the oil with money, sometimes they exchange grains for oil with some countries, sometimes they just loan a 3 world goverment and get a contract to buy their Oil at extreme discounts. Sometimes they have over 60 days to pay to the producers.

If China need Oil they trade on the OTC markets, not the Nymex. In Fact (and maybe im wrong) but probably over 60% of the Nymex Volume came from hedgers, Not especulators

Is another world man, Oil is another world.. People Like Trafigura, Glencore, dreyfus etc, those people use the most sophisticated and extremely complex Strategies to trade their physical assets. everything have a effect this market from USD through emerging market growth.

Of course you can find corruption in this market world wide, But you can find the same kind of corruptions in the Bond markets (bernanke for example) and any other market.

On the Other hand, The cantarell oil field in mexico is almost Out of Oil and the Oil consumption in mexico is UP about 6% today.. mexico is our 2 partner in the oil business.

Also, remmber, You need crude Oil to build even lipsticks, roads, cars, glass, vaseline, ethanol etc etc etc..
 
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