Oil Price Fixnation

[FOTD]

quote:Originally posted by Conan71

FOTD,

Did you read the whole article?

"The truth is Barack Obama is following John McCain's lead to close a Wall Street loophole that was signed into law by President Bill Clinton," said McCain spokesman Tucker Bounds."

If Obama is such a revoutionary, why hasn't he or isn't he leading the charge to change this as a Senator?  Are his ambitions getting in the way of his day job?

McCain voted against closing the loophole within the last two weeks....

Besides, Bill Clinton was party to Ms. Gramms shenanigans. It was all compiled and put into motion under G H W Bush.....

[FOTD]

Report: One trader held 11 pct of Nymex contracts
Thursday August 21, 4:26 pm ET  
Report: Speculators may have played larger role in oil market swings that once thought

http://biz.yahoo.com/ap/080821/oil_markets_speculation.html

SemRon?

[FOTD]

Oil Speculators Cost Consumers $31 Billion this Summer

http://www.tulsaworld.com/news/article.aspx?articleID=20080826_351_E1_hUnsec112552

Unsecured creditors want data on the lead-up to bankruptcy.

Looks like something much deeper going on now....

Operators may have gotten it coming and going. Does not appear there is much chance of these companies getting paid a dime on their oil taken by SemCrude. Then they must pay the royalty owners for money they never got.

Situation is going from grim to grave.

It ain't over till the stripper sez D'Nova. Or, until the orange suits are put on.....

Who's writing the book?

[FOTD]

http://online.wsj.com/article/SB122100706431117489.html

Report Faults Speculators
For Volatility in Oil Prices
By IANTHE JEANNE DUGAN
September 10, 2008; Page C1

"As crude-oil prices sink back toward $100 a barrel, dueling reports soon will be released weighing in on whether, and how much, investors are to blame for the gyrations in oil prices.

Washington lawmakers and a money manager, stepping up an attack on commodities investors, will unveil a report Wednesday that they say shows speculators are to blame for this year's rise and fall in oil prices, which have swung by some 50%.


Several Democratic senators intend to use the findings to bolster an energy bill, which includes measures to scale back how institutions can invest in index funds that track commodities markets. These institutions now hold $220 billion in commodities, up from $13 billion in 2003, according to the report, co-authored by hedge-fund manager Michael Masters.

In mid-July, pension funds and other big institutions "began a mass stampede for the exits" of a range of commodities, the report said, partly as a result of several bills that would force a cutback in these investments. In one commodities fund, investors sold futures contracts linked to about 127 million barrels of crude oil.

Prices dropped roughly 20%, or $29 a barrel, according to the report, which is titled "The Accidental Hunt Brothers," after the Texas family that manipulated the silver market nearly three decades ago.

Democrats are promoting the report on the eve of a report from the main futures-market regulator, the Commodity Futures Trading Commission. The report is expected to offer fresh data that help answer questions about the depth of financial speculation in the oil markets.

The CFTC report will provide results from its data sweep, requiring Wall Street dealers who trade on behalf of institutional investors in the commodities markets to reveal much more about the instruments they sell to them to get exposure to commodities prices.

The derivatives that Wall Street "swaps dealers" package for such clients, which allow them to invest in baskets or indexes of a mix of commodities, aren't traded directly on futures exchanges and until now the CFTC's publicly available, weekly trader reports haven't required Wall Street firms to disclose their clients' off-exchange trading activities.

The CFTC report will soon be made final; the agency is expected to either discuss or release the results by Thursday, when its officials are likely to participate in a hearing by the House Agriculture Committee convened to "review dramatic movements in agriculture and energy commodity markets."

Some critics of the agency expect the CFTC to minimize speculators' impact, in order not to contradict its past assertions that financial participants didn't appear to be driving up oil prices.

Bets in the Billions

At the center of the debate is the impact of tens of billions of dollars that have poured into indexes that track futures contracts. Under futures contracts, investors promise to pay a certain amount in the future for crops, oil and other commodities.

These contracts, traded on markets such as the Chicago Mercantile Exchange, help farmers and others hedge against price fluctuations. Speculators buy futures contracts to make bets on price direction. It is a third group that is at the center of the controversy -- institutions such as pension funds and college endowments, which pour money into indexes that track the futures market.

The reports are part of a battle between Washington and Wall Street over how money is channeled into commodities. The issue took on urgency as food and gas prices soared and after the CFTC in July revealed that more than half of all oil trading came from speculators.

This undermined earlier contentions by the CFTC that speculators weren't influencing oil prices, and prompted lawmakers to ask the CFTC's inspector general to investigate how the agency gathers its numbers.
Wednesday's report said moves by speculative investors have been largely responsible for the oil-price moves of recent months. It will be released by Sen. Byron Dorgan (D., N.D.), Sen. Maria Cantwell (D., Wash.), and Rep. Bart Stupak (D., Mich.), who contend that without controls, these investors could run prices back up. The 50-page report seeks to dispel arguments by some big investors, bankers and economists that oil prices were due to supply and demand.

Crude-oil prices have swung by roughly 50% this year, from about $90 a barrel to more than $145. Tuesday, oil for October delivery settled at $103.26 a barrel, down $3.08, or 2.9%, on the New York Mercantile Exchange.

The recent oil selloff came after several senators proposed laws to curb investments they say drove up the price of gas and food, a notion heralded by Mr. Masters and derided by many economists. Critics said Mr. Masters is trying to buoy his own investing portfolio, which is laden with transportation-related stocks, and lawmakers are trying to show they are addressing high gas prices.

Between January and May, the report said, the price of crude oil rose nearly $33 a barrel, as institutional investors pumped more than $60 billion into commodities through funds that track indexes, the report said.

Meanwhile, the idea that investors are driving up prices is gaining some credence. European Central Bank President Jean-Claude Trichet last week told attendees at a Frankfurt conference that speculation had contributed to the oil-price shock that has hindered global growth. The two presidential nominees, among others, have attacked the trend.

One of the biggest champions of the antispeculation movement is Mr. Masters, 42 years old, who lives in St. Croix and manages Masters Capital Management LLC. The firm reported holdings of about $600 million in a recent regulatory filing, down about half from year end.

Mr. Masters won't comment on the firm's holdings; about 10% are in airlines, autos and other transportation companies that would benefit from lower oil prices. He said profits have been about flat this year.

'Index Speculators'

Mr. Masters stumbled into the spotlight after sending an email to acquaintances earlier this year, complaining that institutions were driving up the price of fuel, food and metals. They are "index speculators," he wrote -- using a term coined by the report's co-author, Adam White, the head of a research and trading firm -- and had to be stopped.

The email found its way to an aide to Sen. Joseph Lieberman (I., Conn.) and ricocheted to other legislators. Mr. Masters soon testified before Congress, and began informally advising legislators.

"You may be the most powerful guy in Washington right now," Sen. Claire McCaskill told Mr. Masters at a June hearing about the impact of investments on oil prices.

Mr. Masters gained admiration from farmers, crop distributors and others who invited him to speak around the country. But he has drawn ridicule from some economists and others, who question his analysis and say he isn't a commodities expert and is trying to boost his own portfolio."


The speculators are now making a fortune on the way down.....especially, those that hold the reserves to deliver in case their bet is wrong. What a tax code!

[FOTD]

Here....Goldmen Mansachs! did our town in......they should have been liable for much of todaze pain!

How Goldman Sachs was at the center of the oil trading fiasco that bankrupted pipeline giant Semgroup.

http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html

not that Mista Bentley Wallace and Mista Hollinger RockChawkJayhawkTom are excused either.....

[RecycleMichael]

Come on FOTD...that was five posts in a row by you. The posts were in June, August, September and now March.

This is a conversation that no one cares about.

What is the sound of one hand clapping?

[FOTD]

Come on FOTD...that was five posts in a row by you. The posts were in June, August, September and now March.

This is a conversation that no one cares about.

What is the sound of one hand clapping?

Takes many moons to get the truth out.....

Traders Blamed for Oil Spike
CFTC Will Pin '08 Price Surge on Speculators, in a Reversal From Bush Findings


By IANTHE JEANNE DUGAN and ALISTAIR MACDONALD

The Commodity Futures Trading Commission plans to issue a report next month suggesting speculators played a significant role in driving wild swings in oil prices -- a reversal of an earlier CFTC position that augurs intensifying scrutiny on investors.

In a contentious report last year, the main U.S. futures-market regulator pinned oil-price swings primarily on supply and demand. But that analysis was based on "deeply flawed data," Bart Chilton, one of four CFTC commissioners, said in an interview Monday.

The CFTC's new review, due to be released in August, adds fuel to a growing debate over financial investors who bet on the direction of commodities prices by buying contracts tied to indexes. These speculators have invested hundreds of billions of dollars in contracts that were once dominated by producers and consumers who sought to hedge against oil-market volatility.


The review also reflects shifting political winds. Under Chairman Gary Gensler, appointed by President Barack Obama, the CFTC is departing from the more hands-off approach it took under its previous head, a George W. Bush appointee. The agency is widely expected to adopt new rules to limit the amount of investments in commodities by big institutions betting on their direction purely for financial gain.

The agency didn't make available preliminary figures from the report and declined to discuss the previous data.

Speculators have been a lightning rod of criticism from politicians world-wide, who worry that rising oil prices could damp the recovery potential of their recession-hit economies. Many lawmakers and regulators say they want to ensure that speculators don't make it more costly for consumers to access heating oil, food and other essentials.

These decision makers don't present a united front. The U.K.'s Financial Services Authority has found no evidence that speculators are behind big oil-price swings, people familiar with the matter said Friday. This view, made by the overseer of one of the world's biggest financial markets, contrasts with an opinion piece published in The Wall Street Journal two weeks ago, by French President Nicolas Sarkozy and U.K. Prime Minister Gordon Brown, who said governments need to act to curb "dangerously volatile" oil prices.

In the U.S., the CFTC begins public hearings Tuesday to determine whether to limit speculative investments in commodities. Congress also is weighing whether to give the CFTC the authority, under a broader proposal to revamp financial regulation, to regulate commodities investments that occur off traditional exchanges. Byron Dorgan, a North Dakota Democrat, has called on the CFTC to curb "oil speculators looking for a quick buck at the expense of American consumers."

The debate over speculators underscores the shifting nature of commodities trading in recent years. Before the mid-1990s, these markets were dominated by entities that had physical dealings with the underlying commodity, and "speculators" who often took the opposite position, providing liquidity to markets.

But a new group of investors has emerged in recent years. Those who want to bet on commodities prices have increasingly put their money in indexes that track the value of futures contracts, in which investors promise to pay a certain amount in the future for oil and other commodities. As of July 2008, financial investors had about $300 billion riding on these indexes, roughly four times the level in January 2006, according to the International Energy Agency, a Paris-based watchdog.

Separately, these investors may buy derivatives, not directly traded on futures exchanges, that let them make contrary bets to offset their risks.

Crude-oil prices surged in July 2008 to a record $145 a barrel, then dropped to about $33 in December. Oil now trades at around $68 a barrel.

Proponents of index speculation say these parties have added liquidity to markets. They blame price gyrations on supply and demand and say attempts to regulate speculation are foolhardy and could drive investors to less-regulated venues.

CME Group, the world's largest commodities exchange, said in a statement that it hasn't seen "any empirical evidence that index funds and speculators distort prices, as has been widely alleged."


The exchange's chief executive, Craig Donohue, said: "We are deeply concerned that inappropriate regulation of these markets will cause market participants to move to dark pools and other unregulated markets, causing irrevocable harm to the entire U.S. economy." Dark pools are private markets where large orders are transacted.

Last year, CFTC Chief Economist Jeffrey Harris told a House Agriculture subcommittee: "The economic data shows that overall commodity price levels, including agriculture commodity and energy futures prices, are being driven by powerful fundamental economic forces and the laws of supply and demand." Mr. Harris didn't return a call to comment.

The acting CFTC chairman at the time, Bush-appointee Walter Lukken, told the House Agriculture committee that CFTC's economists "did not find direct evidence that speculation was driving up prices." Mr. Lukken, now an executive at the New York Stock Exchange, declined to comment.

In preparing its 2008 report, the CFTC sought information from swaps dealers about their off-exchange derivatives transactions. CFTC commissioner Mr. Chilton -- who was appointed by Mr. Bush and now awaits confirmation of his reappointment under Mr. Obama -- said the data the agency gathered was incomplete, with some players providing partial or no information.

Mr. Chilton dissented from the 2008 CFTC report, saying the agency's conclusions didn't go far enough. He expressed doubt about the amount and type of data received, which he called limited and unreliable. "We didn't have all the information we should have," he said. "And we gave it to Congress anyway, and we spun it."


The agency began shifting under Mr. Gensler, its new chairman. During his confirmation process earlier this year, Mr. Gensler said he believed speculation was partly behind the surge in commodity prices.

Mr. Chilton said the new report will contain a more-thorough analysis of the investors in contracts tied to oil and other commodities, and reveal cases in which single traders hold massive market positions. "We now have multiple sources, and confidence from different sources," he says. He said he believes the data on trading outside exchanges is also more reliable.

Meantime, the U.K.'s FSA has been examining whether speculation has driven big oil price swings in recent months. The FSA is leaning toward the conclusion that the moves have more to do with uncertainty over the direction of economic growth than speculation, according to the people familiar with the matter.

The FSA has no jurisdiction over U.S. markets. But it oversees ICE Futures Europe, one of the largest global energy exchanges, which is based in London.

The FSA doesn't believe that limiting the size of trading positions would be "beneficial" for the market. Still, it concedes it doesn't have a "full explanation" as to why it the market has moved as it has.

—Carolyn Cui and Kara Scannell contributed to this article.

http://online.wsj.com/article/SB124874574251485689.html