Well what do you know. I was RIGHT about oil speculation driving up oil prices

[Le Jacquelope]

http://news.yahoo.com/s/ap/20080910...n&printer=1;_ylt=At1R8RmTOBsK32.5js2jD8WMwfIE

Study links oil prices to investor speculation

By H. JOSEF HEBERT, Associated Press Writer
Wed Sep 10, 1:03 PM ET

Speculation by large investors — and not supply and demand for oil — were a primary reason for the surge in oil prices during the first half of the year and the more recent price declines, an independent study concluded Wednesday.

The report by Masters Capital Management said investors poured $60 billion into oil futures markets during the first five months of the year as oil prices soared from $95 a barrel in January to $145 a barrel by July.

Since then, these investors have withdrawn $39 billion from those markets as prices have retreated dramatically, the report said. Oil traded at about $102 a barrel Wednesday on the New York Mercantile Exchange.

"We have clear evidence the fund flow pushed prices up and the fund flow pushed prices down," said Michael Masters of Masters Capital Management, calling the amount of money moving into oil futures markets by large institutional investors in the early part of the year "way off the scale."

Masters said its analysis shows investors "began a massive stampede for the exits" on July 15 and that this caused the price decline.

"These large financial players have become the primary source of the dramatic and damaging volatility seen in oil prices," concluded the report.

The report was released Wednesday by House and Senate sponsors of bills to put additional curbs on oil market speculation and comes in advance of a report on oil market speculation expected possibly this week by the Commodities Futures Trading Commission. The commission regulates commodity markets.

Sen. Maria Cantwell, D-Wash., a sponsor of an anti-speculation bill, said the Masters report challenges CFTC claims to date that supply and demand forces — and not excessive speculation — has driven up oil prices.

"This analysis illustrates that when oil speculators poured large amounts of speculative money into oil markets, prices skyrocketed just as they were hoping ... And when the speculative money got pulled out, prices tumbled," she said.

Sen. Byron Dorgan, D-N.D., said he wants to know "how oil speculators were able to drive prices up and down while the CFTC was asleep at the switch."

An interagency task force, led by the CFTC, concluded in an interim report last July that "fundamental supply and demand factors" influence the oil markets and that the data "does not support the proposition that speculative activity has systematically driven changes in oil prices."

Senate critics of the regulatory agency charged that report was based in flawed evidence.

"The CFTC has its head in the sand," said Rep. Bart Stupak, D-Mich., chairman of the House Energy and Commerce investigations subcommittee.

Stupak said the Masters report shows that that oil prices soared when speculators poured money into future markets even as the federal Energy Information Administration was forecasting supply would exceed demand.

Congress for months has been considering various measures aimed at curbing oil market speculation, but those efforts have been thwarted amid disputes over other energy issues from taxing oil companies to new offshore drilling.

Legislation before the Senate would put limits on the amount of oil certain traders, interested only in speculation, would be allowed to purchase in futures markets and give new authorities and staff to the CFTC to regulate oil markets.

(This version CORRECTS SUBS 3rd graf to correct price, $102 sted $1.02. Moving on general news and financial services.)

 

[Handprints]

For balance, you might have noted the views of the 100 or so economists, futures traders and market makers who all called his report nonsense, or noted that he runs a hedge fund that is currently fully loaded with stocks that tend to soar in value when people believe that oil prices are going to fall, or mentioned that he wrote the report at the behest of Congress' protectionist wing... But balance isn't really your thing, is it?

 

[ishtat]

I know a hedge fund manager and he has quite a poetic description of supply & demand versus speculation.

" Supply and Demand is like the tide rolling in and out, ultimately all powerful nothing you can do will alter it. Speculation is the scum on the waves, some gets tossed onto the beach some gets washed back with the tide ultimately counting for little"

I reckon his poetics trumps the thread starters "impartial" source

 

[Le Jacquelope]

For balance, you might have noted the views of the 100 or so economists, futures traders and market makers who all called his report nonsense, or noted that he runs a hedge fund that is currently fully loaded with stocks that tend to soar in value when people believe that oil prices are going to fall, or mentioned that he wrote the report at the behest of Congress' protectionist wing... But balance isn't really your thing, is it?

Futures traders and market makers, eh? The same people who tend to profit from higher oil prices?

I was tracking and posting some stuff about the inflow of index speculator money into oil futures during the meteoric run-up in prices way back. I know that's not b.s. I wonder if the fall in prices really did follow them taking their money out. I don't think that's b.s. at all.

 

[Handprints]

Futures traders and market makers, eh? The same people who tend to profit from higher oil prices?

The first group - futures traders - are cardsharps: they don't profit from higher futures prices, the profit from having new (read: dumb) traders deciding to pull up a seat at the poker table. The second group - market makers - are bookies: they don't care if you win or lose, they just want you to keep betting.

The person who demonstrates any link from futures prices to spot prices is a lock for a Nobel prize. No offense, but I don't think it's going to be you.

Anyone reading this thread in the hope of picking something up about the economics of oil prices might find it useful to consider the following. What seems a more likely reason for surging, then falling, oil prices:

1. The dollar (the thing that oil is priced in) taking a nosedive while oil consumption is surging in less-developed countries, leading to oil prices rising, then the same dollar rebounding while developing economies are beginning to cool off leading to oil prices falling; or

2. A change in the fund flows for oil futures - a measure of how many people are playing times the average cost of their buys/sells - in a volume roughly equivalent to a slow day's real-world oil trading.

Back on ignore, I'm afraid: I've lost my taste for arguing in favour of reality.

H

 

[amicus]

There is no law against being an activist and a propagandist, peddling falsehoods and perpetuating the ongoing attack on free market mechanics.

It is, however, pleasant, to see this poster called out time and time again as just that, the purveyor of false and misleading information.

Amicus...

 

[Le Jacquelope]

The first group - futures traders - are cardsharps: they don't profit from higher futures prices, the profit from having new (read: dumb) traders deciding to pull up a seat at the poker table. The second group - market makers - are bookies: they don't care if you win or lose, they just want you to keep betting.

The person who demonstrates any link from futures prices to spot prices is a lock for a Nobel prize. No offense, but I don't think it's going to be you.

Anyone reading this thread in the hope of picking something up about the economics of oil prices might find it useful to consider the following. What seems a more likely reason for surging, then falling, oil prices:

1. The dollar (the thing that oil is priced in) taking a nosedive while oil consumption is surging in less-developed countries, leading to oil prices rising, then the same dollar rebounding while developing economies are beginning to cool off leading to oil prices falling; or

2. A change in the fund flows for oil futures - a measure of how many people are playing times the average cost of their buys/sells - in a volume roughly equivalent to a slow day's real-world oil trading.

Back on ignore, I'm afraid: I've lost my taste for arguing in favour of reality.

H

Fine, you go on ignore, too. You spout total inaccuracies without any supporting documentation whatsoever about the oil market, declare it to be gospel, and then ignore people who disagree.

I have no time for pompous asses like you. I, and more importantly, Congress, are most certainly disregarding your ignorance in this matter.

I and the rest of this country are going to have the last laugh on you when we bring these speculators back down to size while you are still putting facts on ignore. You have no idea just how totally outgunned, outclassed and most of all outnumbered you are. With attitudes like yours, the oil industry will lose this battle with the world even faster than it already is.



http://www.chron.com/disp/story.mpl/business/5994870.html#

New focus on speculation
Report points to influence of 'dark markets' on oil price spike
By KEVIN G. HALL Mcclatchy-tribune
Sept. 10, 2008, 10:23PM

WASHINGTON — Federal regulators have uncovered evidence that oil speculators operating in unregulated "dark markets" may have helped drive the price of oil to record highs this year.

The Commodity Futures Trading Commission is expected to issue a long-awaited report before Monday, perhaps today, on what role oil speculators played in the 50 percent rise in oil prices earlier this year. The report isn't expected to declare that speculators are the main cause of the price rise, a conclusion the agency rejected in an interim report in July.

One CFTC commissioner, Michael Dunn, signaled last week that the report would be inconclusive, noting, "I doubt it is possible to come up with a definitive answer one way or another at this time" about the role of speculators.

However, unregulated markets account for two-thirds of oil trading on financial markets, and they could be used to manipulate prices on regulated exchanges that account for the remaining trading.

The finding that some speculators exceeded positions allowed in regulated markets is sure to spark debate about how much the CFTC knows about the markets it regulates, whether more stringent reporting requirements are needed, and whether the government should require more disclosure from speculators and banks.

It's not entirely clear how the CFTC, which is under heavy criticism from Congress, will portray its findings about the large dark-market positions in the much-anticipated report. The agency's interim report said it thought that the soaring oil prices earlier this year were due to underlying fundamentals of supply and demand.

Acting CFTC Chairman Walter Lukken is scheduled to testify today before a House committee.

After the interim report was released in July, he was mocked by Sen. Byron Dorgan, D-N.D., who questioned the report's timing ahead of an expected congressional vote on energy legislation.

On Wednesday, timing again was an issue as Dorgan called a news conference to present a report ahead of the CFTC's.

His report came from hedge fund manager Michael Masters, who alleges that oil speculators were almost completely responsible for the run-up in oil prices — and their recent decline.

"We have a brain-dead regulator here ... content to do nothing," Dorgan said.

The CFTC declined comment.

The report from Masters and his partner, Adam White, uses CFTC data to conclude that from January through the end of May, index investors pumped $60 billion into major commodity indexes, and oil prices rose $33 a barrel.

Beginning on July 15, a sell-off of these commodities began, resulting in about $39 billion pulled out, and a $29-per-barrel drop in oil prices.

"Clearly what affects prices is money. Money came in and money went out," Masters told reporters, saying that prices moved not on supply-and-demand fundamentals, but by investors' decisions.

That view was challenged by the Smart Energy Policy Coalition, a group that represents the futures industry and commodities dealer trade associations.

In late May, the CFTC announced that it was, for the first time, using its so-called special call authority to demand that traders show their positions in a complicated, unregulated parallel market called the over-the-counter swaps market.

Specifically, the agency is looking into swap dealers, who enter into complex private contracts for oil sales away from the peering eyes of regulators.

Some of the speculators doing business with swap dealers — who generally are large investment banks such as Goldman Sachs and Morgan Stanley — have built positions that would be prohibited in regulated futures markets.

Swap dealers are exempt from position limits because they enter into private contracts in the over-the-counter market, and then hedge the risks from those contracts in the regulated futures market.

Regulators know what swap dealers' positions are in regulated markets, but they have far less information about who's on the other end of a swap deal.

 

[Le Jacquelope]

Congress knows oil speculators are driving up the price of oil.
The International Monetary Fund knows this.
Saudi Arabia knows this.

But little tiny HANDPRINTS is going to trump them all with his undocumented bullshit?

HANDPRINTS? Who the hell is this guy? And why should anyone ever listen to him over far more credible entities like the International Monetary Fund?

Well, any hope I ever had of voting Republican again, for ANYTHING, just went by the boards. Democrats are targeting these speculator assholes and the Republicans have got to go. The time for debate is over, action is what's needed. We need a 50% margin requirement for oil speculators.