Oil prices: Supply & Demand or manipulation?

[Son of Norway]

Article here:

Oil Trading's Powerful "Dark Markets", CBS News Looks Inside Futures Trading Beyond Watch Of U.S. Regulators - CBS News

Quote:

"If you can trade out of the sight of U.S. regulators, you can manipulate these markets," said Michael Greenberger, a former top staffer at the Commodities Futures Trading Commission, or CFTC, which regulates the trading of commodities like oil in this country.

He recently told Congress that speculation is placing a huge premium on the price of oil.

"How much per barrel?" Keteyian asked.

"Well, there have been various estimates - anywhere from 25 percent to 50 percent," Greenberger said.



Oil will always rise in price but it appears that much of the dramatic increase can be traced to market manipulation in an unregulated futures market.

[longtalltechsan]

Oh but I thought it was the oil companies doing it!

[afmo]

of course they're manipulating the markets

every trend says this spike in price is an anomaly...

[yeahYeah]

speculators.... just like the housing market and the over inflated prices... it was all speculators.

[Son of Norway]

The vehicle for letting the market go unregulated is called the "Enron Loophole", the same tactic used to screw California during a trumped-up energy shortage.

If it worked in Cali, it can work nationwide.

Some info here:

The Enron Loophole - Seeking Alpha

[afmo]

Originally Posted by yeahYeah

speculators.... just like the housing market and the over inflated prices... it was all speculators.

Which is why i've said and continue to say, the bubble will burst.

[Son of Norway]

It should be interesting to see where McCain stands on this issue. His advisors created this loophole but he has been on record in the past as opposing it.

More:

The Raw Story | McCain advisors created and defend 'Enron loophole'

[Delija]

Originally Posted by yeahYeah

speculators.... just like the housing market and the over inflated prices... it was all speculators.

LOL....another informed opinion!!!

People who "speculated" on the housing market actually in the overwhelmingly vast majority of cases took possession of the houses they "speculated" on. (Some did not, they sold their contracts or options on contracts to other speculators who DID take possession, but that was a very small percentage of what actually transpired).

People who speculate in the futures market virtually NEVER take possession of the commodities they trade. Certainly outside of rare instance of financial "soft" commodities, I'd say never at all.

Bona fide hedgers DO sometimes take delivery, but they are NOT "speculators" nor do they even trade in the futures markets under the same set of rules as speculators.

Look it up if you are so inclined which is unlikely - facts can so easily ruin a "good argument" LOL.

I have yet to hear of ONE SINGLE INSTANCE of a speculator having oil (or live cattle, or grains or pigs, or precious or industrial metals, or produce or any other traded hard commodities regulated by the CFTC) dropped on their front lawns. Oh, and just so you know, if a speculator does not sell his position before the contract expires, that's EXACTLY what would happen.

Imagine living in an apartment in New York City and having 10,000 head of live cattle delivered to your address! LOL

Of course I suppose it is possible that it's happened and I was not aware. But since I've been a member of the Chicago Board of Trade, and the Chicago Mercantile Exchange and a licensed commodities trader and prior to that a licences commodities broker since the mid 1980s, I kind of think I'd hear about such a comical outcome. In fact I'd be willing to bet that everyone in the country would hear about it on the news (or at least those who read newspapers or even watch network TV news).

I'm sure if I am mistaken you will correct me and give me ONE SINGLE EXAMPLE of a speculator taking physical delivery of any futures contract.

Thanks for the laugh. Always a pleasure to read an expert opinion from an obviously qualified source!!!!!

Best laugh I've had all day. Please keep them coming!!!!!



Peace,
D.

[yeahYeah]

Originally Posted by Delija

LOL....another informed opinion!!!

People who "speculated" on the housing market actually in the overwhelmingly vast majority of cases took possession of the houses they "speculated" on. (Some did not, they sold their contracts or options on contracts to other speculators who DID take possession, but that was a very small percentage of what actually transpired).

People who speculate in the futures market virtually NEVER take possession of the commodities they trade. Certainly outside of rare instance of financial "soft" commodities, I'd say never at all.

Bona fide hedgers DO sometimes take delivery, but they are NOT "speculators" nor do they even trade in the futures markets under the same set of rules as speculators.

Look it up if you are so inclined which is unlikely - facts can so easily ruin a "good argument" LOL.

I have yet to hear of ONE SINGLE INSTANCE of a speculator having oil (or live cattle, or grains or pigs, or precious or industrial metals, or produce or any other traded hard commodities regulated by the CFTC) dropped on their front lawns. Oh, and just so you know, if a speculator does not sell his position before the contract expires, that's EXACTLY what would happen.

Imagine living in an apartment in New York City and having 10,000 head of live cattle delivered to your address! LOL

Of course I suppose it is possible that it's happened and I was not aware. But since I've been a member of the Chicago Board of Trade, and the Chicago Mercantile Exchange and a licensed commodities trader and prior to that a licences commodities broker since the mid 1980s, I kind of think I'd hear about such a comical outcome. In fact I'd be willing to bet that everyone in the country would hear about it on the news (or at least those who read newspapers or even watch network TV news).

I'm sure if I am mistaken you will correct me and give me ONE SINGLE EXAMPLE of a speculator taking physical delivery of any futures contract.

Thanks for the laugh. Always a pleasure to read an expert opinion from an obviously qualified source!!!!!

Best laugh I've had all day. Please keep them coming!!!!!



Peace,
D.

Do u want a medal for your ability to make yourself look smart?

[Sirius1963]

Originally Posted by Delija

LOL....another informed opinion!!!

...snip....

People who speculate in the futures market virtually NEVER take possession of the commodities they trade. Certainly outside of rare instance of financial "soft" commodities, I'd say never at all.
...
Peace,
D.

Now I'm really corn-fused (futures pun intended) So speculators only make the price really go up if they take delivery? I don't get the connection between taking delivery (or not) and prices going up.

In fact, I still don't get the whole thing. I decide that something (corn, oil, hogs, etc) are going to go up, so I buy a contract of corn now, and sell it in Sept. That part is easy.
I think something (maybe lumber) is going to go down, so I "go short" and sell it to you now, but you don't want it until Sept. Come Sept, I buy it and give it to you. If it went down, I make money. that I get also.

Back to the first one. I think corn will go up, so I buy some contracts. Now if I go around telling people that corn will go up, to buy,buy buy, put out statements saying there is a shortage, etc, now the demand is up, so the price goes up. I didn't just "speculate", I tried to manipulate the market. Isn't that already illeagal as securities fraud or insider trading or something?

I think I see where Delija is going with this. I bought contracts, not actual product, so how can prices go up because of supply/demand. when I didn't change the supply at all.

I think I answered my own question!