Global Oil Pricing

yes oddtrader, we all agree the world is running out of oil and demand far exceeds supply. The question is and what Cook's article explains is we are starting from a completley inflated base price.

So it's really just a simple matter of the market anticipating the dire consequnces. but the smart money already got in and out.
 
Interesting development:

http://blog.seattlepi.com/seattlepolitics/2011/07/07/bring-energy-manipulators-to-heel-cantwell/

"
Bring energy manipulators to heel — Cantwell

Federal regulators now have all the legal tools they need to stop manipulation of oil, natural gas and electricity prices: So use them, Sen. Maria Cantwell, D-Wash., urged Thursday.

“You have to piece the puzzle together: People don’t simply hand you the information,” said Cantwell, who started tracking price manipulation 10 years ago.

Back then, the West Coast suffered a shortage of electric power deliberately made worse by traders from the Houston-based Enron Corp. The Enron boys used schemes given such names as “Death Star,” “Get Shorty” and “Fat Boy” to manipulate energy prices.

Nowadays, Cantwell has watched oil prices soar twice in the past three years — to more than $140 a barrel in the spring of 2008, and up over $100 a barrel in recent months — despite the existence of abundant supplies.

“We’ve seen this happen in electricity, we’ve seen it happen in natural gas: Somebody has to set the rules of the road, and somebody has to prosecute those who violate them,” Cantwell said in an interview with seattlepi.com.

She spoke as the Commodities Futures Trading Commission approved a new market-manipulation rule. Cantwell championed the rule as part of last year’s Wall Street reform legislation, formally known as the Dodd-Frank Financial Reform bill.

The rule will enable CFTC to more effectively prosecute manipulation of commodity futures and derivatives’ market prices.

The CFTC has already filed one case against a company buying up oil in anticipation of higher prices.

The new rule switches the CFTC from requiring proof of “specific intent” to manipulate commodities markets to a fraud-based “reckless conduct” standard applied by such other agencies as the Federal Energy Regulatory Commission and Federal Trade Commission.

Despite its complexity, the “reckless conduct” standard stands to have impact from the gas pump to the monthly electrical bill.

A decade ago, traders for now-defunct Enron engaged in market manipulation literally every day from January 2000 until June 2001. They joked in company financial documents about jacking up the electricity bills of elderly widows.

Cantwell and attorneys for the Snohomish County Public Utility District forced a lethargic Federal Energy Regulatory Commission to demand records and release 750 pages of Enron financial documents.

The documents showed a billion-dollar gouging of Western states, including a $122 million bill to the Snohomish PUD. In one famous incident, Enron made $222,678 in three hours by transferring power from California to Oregon, concealing its source of origin, and selling it back to California at a higher price.

The new chairman of FERC at that time was hesitant to proceed. He had been recommended for the job by Enron Chairman Ken Lay, or “Kenny Boy” as he was called by close friend George W. Bush.

“What Enron helped teach me is that energy is the lifeblood of our economy,” Cantwell said. “Someone can introduce manipulation into a tight market and effect supply. We’ve seen similar situations.”

She noted that the Federal Energy Regulatory Commission can now use the “reckless conduct” standard in electrical energy markets, and that the Federal Trade Commission has powers in monitoring the retail sale of gasoline.

In fact, a more active FERC has (as of March) used “reckless conduct” to conduct 93 investigations, gaining 45 settlements and civil penalties totaling $122.2 million and forcing manipulators to disgorge $35.9 million in ill-gotten profits.

CFTC Chairman Gary Gensler thanked Cantwell for helping secure “this important authority” for his agency.

But the CFTC will have to fight for the staffing needed to use the tools it has been given.

Pending budget legislation in the Republican-run House of Representatives would deny such agencies as the CFTC, FERC and FTC of money needed to implement oversight provided in Dodd-Frank.

“How can you be against fighting market manipulation?” asked Cantwell.

She noted, however, the four Republican senators from New England states “who rely on home heating oil through the winter months.” Cantwell had their votes when the legislation was on the Senate floor last year. She may need them again.

"
 
if it's so easy to manipulate a market let's see you do it. Back in the old days I had a friend who was a MM on nasdaq. He told me,"I can move a stock an eighth, maybe a quarter for about fifteen minutes."

If it's so easy, why doesn't the government just take all the social security money and medicare money and just go long CL?

Why does anybody complain heating oil is too high and being manipulated? It's a free market, even if you are poor, you can form an investment club in your neighborhood and just go long if it's so easy.

Nobody complains when I'm losing my ass by betting wrong, but when I bet right suddenly somehow I am manipulationg the market.

What do they want me to do? Always lose money so they won't feel so bad?
 
Don't know, basically!

Probably short term price movement (within a range) could be speculating; long term trend be supply and demand as well as USD.

Quote from BCE:


Global Oil Pricing
http://www.theoildrum.com/node/8834
More...

Great article and discussions!

"
Here are the annual Brent crude oil prices from 2005 on, along with the rates of change relative to 2005:

2005: $55,
2006: $65, +17%/year
2007: $72, +13%/year
2008: $97, +19%/year
2009: $62, + 3%/year
2010: $80, + 8%/year
2011: $111, +12%/year

"

"
mididoctors on January 12, 2012 - 12:59pm Permalink | Subthread | Parent | Parent subthread | Comments top

but how can these medium and long term positions effect the pit price on the day .. especially if they are rolled over and no oil appears?

I still do not understand how the paper oil effects the spot price

I just do not understand

I go and buy up a whole bunch of long term positions and push those positions up in price..you've been contangoed... at expiration if the demand isn't there I lose my shirt

or

if I roll over in some cash contract off the floor because the original seller buys it back no one knows and its as thou the oil never existed ...... the money is just kept in stasis hovering on the edge of a cliff...

or am I wrong?


Darwinian on January 12, 2012 - 1:56pm Permalink | Subthread | Parent | Parent subthread | Comments top

Midi, on average over half of all contracts traded are for the near term contract, especially early in the life of that contract as "near term". When that contract has only a few days to run, then contracts will begin to move to the next month. Check it out at: Light Crude Oil. That contract (February) has less than 10 days to run but volume is still over four times higher than the next contract (March), though March open interest is now higher.

But look down at the far out months, the ones some folks claim pushes the price higher. They have very little volume. These contracts have virtually no effect on near term prices. Only the nearest term contract, and near expiration the second to near term contract, has any effect on the price of oil. The near term contract is the only one ever quoted and the only one used as any kind of benchmark.

The far out contract prices are simply ignored, except by some paper traders of course. Some traders specialize in arbitrage and try to hedge one contract against another. And of course hedgers constantly watch the far out contracts because these are the only contracts they buy or sell. They are hedging themselves to guarantee a fair price in the future. But true hedgers make up only a very tiny fraction of all trades.

Note: So called "Hedge Funds" have nothing to do with actually hedging the future price of oil. They call themselves "Hedge Funds" because they buy and sell several different commodities. If they lose money in one they may hope to make it up in another. That is their "hedge". True hedgers are actually producers or consumers of oil like refineries or dealers in the physical product.

Ron P.

"
 
hedge funds got their name because in those days mutual funds only could trade cash and had to hold 80 days. They could legally go both long and short.

A hedge fund could trade on margin and was exempt from the 80 day rule.

That was too complex for the media to understand so they just thought hedge funds were short.
 
Quote from oldtime:

ok, now you're freaking me out, you're not anti jewish are you?
More...
No, not really. Not at all. :) Just anti corporate greed and manipulation at the expense of everyone else.
 
Quote from BCE:

Cook's involvement in the Iranian Oil Bourse project stemmed from work he did in the late nineties on manipulation of the oil market by the intermediaries. As a result of the realization of how the intermediaries were making the market more volatile than it needed to be, making money at both the producer and consumers expense, Cook wrote to the governor of the central bank of Iran proposing the creation of a Middle Eastern Exchange with its own benchmark price.

The Iranians liked the idea, the Saudis however couldn't support it due to US connections. After 9/11 the Saudi's withdrew their objections and in May 2004 Cook was invited to Iran's central bank to give a presentation setting out how an oil exchange might operate. Cook and his consortium got the contract to put it together. Difficulties arose however since the Oil Ministry didn't want transparency in the oil market, the current system not withstanding its flaws was making the Iranian elite lots of money.
More...

A Poor excuse indeed!

http://en.wikipedia.org/wiki/List_of_commodities_exchanges

Apparently there are always new exchanges established, such as
"Cambodian Mercantile Exchange CMEX Phnom Penh, Cambodia Energy, Industrial Metals, Rubber, Precious Metals, Agri Commodities."

"Dubai Mercantile Exchange DME Dubai Energy

Iran Mercantile Exchange IME Tehran, Iran Industrial and Mineral Products, Oil By-products and Petrochemicals Products, Agricultural Products

Iranian oil bourse IOB Kish Island, Iran Oil, Gas, Petrochemicals
"

Nobody could stop establishing another new exchange, I guess.

"If you build it, he will come." --- Field of Dreams (1989)
http://en.wikipedia.org/wiki/Field_of_Dreams

My view is the whole issue is really a systemic problem. Merely a new exchange cannot easily resolve the big problem fundamentally.
 
https://www.theice.com/publicdocs/ICE_ASCI_FAQs.pdf

" DOES THIS MEAN THE END OF WTI AS A BENCHMARK?

The components of the Argus Sour Crude Index (“ASCI”) price trade relative to WTI in the spot market. Any future correlation disruptions of inland markers like WTI and U.S. Gulf prices will reinforce the independence of the ASCI index flat price through its differentials to WTI.

As a physical benchmark, WTI has experienced many well-documented issues for some time, and as WTI production falls, it is becoming less representative of U.S. Gulf Coast deliveries, which tend to be sour.

In general, the overall crude slate is becoming more sour and heavier in quality, and therefore the ASCI index flat price could become less correlated with WTI over time, with more volatility in the differentials.

"
 
You must log in or register to reply here.
Back
Top