Oil is where it is now because......

[arealpissedgoy]

Same thing is happening today with Crude oil as did with the Hunt brothers cornering the silver market in 1980.

Silver Thursday

The Hunt brothers had invested heavily in futures contracts through the brokerage firm Bache Halsey Stuart Shields, now Prudential-Bache Securities. When the price of silver dropped below their minimum margin requirement they issued a margin call for $100 million. The Hunts were unable to meet the margin call and the ensuing panic was felt in the financial markets in general as well as commodities and futures.


If the US govt. simply increased the margin required, the price of oil would plummet overnight.

However all the drug addled hedge fund monkeys would go broke. But we can't have that. After all, the current govt. is there to bail out the stupid rich.

 

[Covert]

Quote from Realist:

In due time, federal regulators must step in and clamp down on the rampant speculation by the large fund traders. Right now there is no action being taken by the CFTC because the current administration is under no pressure to do so. This will change very soon though. I expect some kind of speculative blow-off top in Crude and then a magnificent crash of epic proportions in the oil price. The stock markets will likely appreciate dramatically as Crude prices come off. The US Dollar should also come off the ropes as well.

My goodness- I NEVER heard people complaining about "rampant speculation" in 1998 when talking about the NASDAQ market- it was only when the bubble burst that speculators called out, but there weren't any serious calls for MORE REGULATION in the face of that. The market simply tood care of that.
If you can find something wrong (illegal), I say prosecute to the fullest extent of the law. However, you cannot punish speculation in a truly free, open market...period.

 

[PohPoh]

Quote from Covert:

My goodness- I NEVER heard people complaining about "rampant speculation" in 1998 when talking about the NASDAQ market- it was only when the bubble burst that speculators called out, but there weren't any serious calls for MORE REGULATION in the face of that. The market simply tood care of that.
If you can find something wrong (illegal), I say prosecute to the fullest extent of the law. However, you cannot punish speculation in a truly free, open market...period.

I have no problem with speculation...speculation can only drive prices to the point at which that price no longer makes sense.
Crude fundies are quite similar as they were when the price was half of what it currently is..

Never mind that...

Problem is that the ICE exchange, which has no position limits, and no regulation, is one of the reasons for the artificially high oil prices (among others of course - weak dollar, strong demand, war, etc..)

But if you put position limits on these ICE fuckers you'd see the price of crude fall $40 overnight..

But what incentive does our government have to do that?
They would much rather spend our tax dollars investigating steroids in baseball..

go figure...

 

[ammo]

we did not in the last 12 months suddenly discover that there is a shortage in world oil,there has been a conscience effort on the part of the media to ring this bell over and over for a year and before the media was instructed to do so,the purchasers of those articles and live media broadcasts set themselves up to profit from it,this same news was spread in 1973

 

[Aboushi]

Quote from Realist:

In due time, federal regulators must step in and clamp down on the rampant speculation by the large fund traders. Right now there is no action being taken by the CFTC because the current administration is under no pressure to do so. This will change very soon though. I expect some kind of speculative blow-off top in Crude and then a magnificent crash of epic proportions in the oil price. The stock markets will likely appreciate dramatically as Crude prices come off. The US Dollar should also come off the ropes as well.

I could not have said it better my self

 

[sttrader]

Our present government will not clamp down as it benefits those close to it. Once the Bush administration is out, we may see some changes. You have to help those who got you into power.

 

[sttrader]

The media could play a bigger part in bringing things to light by informing the general public about how things work but then the first ones to do so would be blackballed by the gov't. The US has become a country where the people are afraid of the government. It should be the other way around.

 

[PitchBlack]

Quote from PohPoh:

I

But what incentive does our government have to do that?
They would much rather spend our tax dollars investigating steroids in baseball..

go figure...

This government was elected by the majority of the american voters. This government gave the highest rates of terrorism and fastest increasing energy prices ever seen back, as a sign of gratitude to the voters.

The voters were so thrilled that they even reelected this same government. And the government did what it did the previous years: increase energy prices and increase the risk of terror.

How stupid can one be to elect such a government? And why should they complain now? They got what they asked, twice in a row.

 

[Charlie_Sheen]

I found the article interesting - but incomplete.

I have questions.

The author did not mention why the NYMEX prices would gravitate toward the "artificially" inflated ICE prices. Wall Street looks to "arb" almost anything. Seems they would look to "arb" the ICE prices down rather than the NYMEX prices up. (And, in the process of shorting the ICE products and buying the NYMEX, some of the massive long positions he speaks about would be countered somewhat).

The author did not say that there has been a shift by refiners and other buyers of physical crude oil away from pricing their physical purchases via an average of NYMEX prices to an average of ICE prices instead. I am not saying this isn't happening, just saying he did not mention it. Not mentioning this is a major oversight. If physical barrels are still being priced on NYMEX averages and not ICE averages, then the ICE prices have no impact on the price paid by buyers of physical oil.

The position limit stuff is interesting but also incomplete. The NYMEX position limit on crude oil is 20,000 contracts. With a margin that is either side of $9,000 per contract, depending upon your clearing status, you would have to put up either side of $180 mln dollars before needing more room to play. So there may be players who want to make quarter of a billion dollar or more plays on oil, but how does that position the NYMEX to follow ICE instead of ICE following the NYMEX?

In July 2007, the NYMEX CEO testified that the NYMEX asked Amaranth to reduce their NG position. He says Amaranth simply moved positions over to the ICE. His point was that Amaranth was a loaded gun likely to wreck itself and potentially be unable to honor its remaining NYMEX counterparty obligations - leaving the NYMEX to fill in and suffer the risk. His point was not price domination. And we all know that bidding up prices with mega positions on the ICE did not ultimately alter the NG prices in the favor of Amaranth.

Re: Price, the NYMEX CEO said that NYMEX and ICE are in court because ICE uses (or, in his words 'misappropriates') NYMEX's settlement prices. So, how is ICE dragging the NYMEX "up" if they use NYMEX 's settlement prices?

Since many of the consumed physical crude bbls. are priced off of the NYMEX / IPE , I concur that speculation can affect the purchase price. But that would be NYMEX and IPE speculation. The argument re: the ICE impact is very incomplete without a discussion of how the arbitrage (if any) between the two brings a bullish bias to NYMEX or IPE crude oil prices. Particularly if ICE is using NYMEX prices to settle contracts.

Would have been a better article if he pointed out the potential clearing risks to NYMEX associated with ICE and the lack of limits / transparency on positions.

That, however, could be an issue specific to the NYMEX stock price rather than overall global energy prices.

 

[ljyoung]

Quote from Charlie_Sheen:

I found the article interesting - but incomplete.

I have questions.

The author did not mention why the NYMEX prices would gravitate toward the "artificially" inflated ICE prices. Wall Street looks to "arb" almost anything. Seems they would look to "arb" the ICE prices down rather than the NYMEX prices up. (And, in the process of shorting the ICE products and buying the NYMEX, some of the massive long positions he speaks about would be countered somewhat).

The author did not say that there has been a shift by refiners and other buyers of physical crude oil away from pricing their physical purchases via an average of NYMEX prices to an average of ICE prices instead. I am not saying this isn't happening, just saying he did not mention it. Not mentioning this is a major oversight. If physical barrels are still being priced on NYMEX averages and not ICE averages, then the ICE prices have no impact on the price paid by buyers of physical oil.

The position limit stuff is interesting but also incomplete. The NYMEX position limit on crude oil is 20,000 contracts. With a margin that is either side of $9,000 per contract, depending upon your clearing status, you would have to put up either side of $180 mln dollars before needing more room to play. So there may be players who want to make quarter of a billion dollar or more plays on oil, but how does that position the NYMEX to follow ICE instead of ICE following the NYMEX?

In July 2007, the NYMEX CEO testified that the NYMEX asked Amaranth to reduce their NG position. He says Amaranth simply moved positions over to the ICE. His point was that Amaranth was a loaded gun likely to wreck itself and potentially be unable to honor its remaining NYMEX counterparty obligations - leaving the NYMEX to fill in and suffer the risk. His point was not price domination. And we all know that bidding up prices with mega positions on the ICE did not ultimately alter the NG prices in the favor of Amaranth.

Re: Price, the NYMEX CEO said that NYMEX and ICE are in court because ICE uses (or, in his words 'misappropriates') NYMEX's settlement prices. So, how is ICE dragging the NYMEX "up" if they use NYMEX 's settlement prices?

Since many of the consumed physical crude bbls. are priced off of the NYMEX / IPE , I concur that speculation can affect the purchase price. But that would be NYMEX and IPE speculation. The argument re: the ICE impact is very incomplete without a discussion of how the arbitrage (if any) between the two brings a bullish bias to NYMEX or IPE crude oil prices. Particularly if ICE is using NYMEX prices to settle contracts.

Would have been a better article if he pointed out the potential clearing risks to NYMEX associated with ICE and the lack of limits / transparency on positions.

That, however, could be an issue specific to the NYMEX stock price rather than overall global energy prices.

Thanks to sstrader for reposting this article in full. You make some good points CS and seem to be saying that you question why ICE should be driving NYMEX. Is not the essential problem the lack of transparency with respect to who is holding what and how much is involved? Will this not affect the"arbability"?

lj