Official evidence that oil prices are being manipulated

[Bradley Walker]

Oil speculators held great sway over prices, data suggest
http://www.latimes.com/business/la-fi-oil21-2008aug21,0,3654822.story?track=rss

CFTC documents show Vitol was one of the most active traders of oil on the Nymex as prices reached record levels. By June 6, for instance, Vitol had acquired a huge holding in oil contracts, betting prices would rise. The contracts were equal to 57.7 million barrels of oil -- about three times the amount the United States consumes daily. That day, the price of oil soared $11 to settle at $138.54. Oil prices eventually peaked at $147.27 a barrel July 11; crude closed at $114.98 on Wednesday.

The documents do not say how much Vitol put down to acquire this position, but under Nymex rules, the down payment could have been as little as $1 billion, with the company borrowing the rest.

The biggest players on the commodity exchanges often operate as "swap dealers" that primarily invest on behalf of hedge funds, wealthy individuals and pension funds.

To build up the vast holdings this practice entails, some swap dealers have maneuvered behind the scenes, exploiting their political influence and gaps in oversight to gain exemptions from regulatory limits and permission to set up new, unregulated markets. Many big traders are active not only on the Nymex but also on private and overseas markets beyond the CFTC's purview.

Using swap dealers as intermediaries, investment funds have poured into the commodity markets, raising their holdings to $260 billion this year from $13 billion in 2003. During that same period, the price of crude oil rose unabated.

Data from the CFTC show that at the end of July, just four swap dealers held one-third of all Nymex oil contracts that bet prices would increase. Energy analysts say the data are evidence of the concentration of power in the markets.

CFTC leaders have contended that speculators are not influencing commodity prices.

If any new information arises during the agency's examination of swap dealer activity, officials said they would report it to Congress.

[Blink]

Greasy.

[IowaDiscGolf]

I don't know about anyone else but I find the lack of outrage over CFTC's "findings" to be pretty outrageous itself. Where there's smoke, there's apparently no fire, none at all? 'Yeah, we looked into it, there's nothing there. Sorry, gotta go.' Huh? Legislation to discourage this kind of economic power consolidation was introduced and summarily defeated in the Senate along party lines, as opposition refused to pass the motion without provisions for new drilling rights, etc. That is as simple as going to bat for Big Energy while flipping Joe Average the bird. The people who voted against this are the ones who are pushing the "supply vs. demand fundamentals" argument the hardest.

[Bradley Walker]

That is as simple as going to bat for Big Energy while flipping Joe Average the bird. The people who voted against this are the ones who are pushing the "supply vs. demand fundamentals" argument the hardest.

On that, we agree 100%. That is EXACTLY what is happening...

It appears that our regulating agencies are no longer protecting the Average Joe, they are protecting the big money players. Note bank bailouts, etc.

The way I see it, we are being lied to constantly in regards to the world markets.

[IowaDiscGolf]

Question is, how long do people want to continue looking the other way, or rationalizing patterns of behavior like this? CFTC made a big noise about their "investigation", going so far as to claim that it had already been in progress for months prior to their announcing it publicly, and then they released their findings without any fanfare, not so much as a whimper. I'm starting to believe this is a token regulatory body with absolutely no intention of betraying their generous Big Oil benefactors. Classic fox in the hen house.

[JR]

That is as simple as going to bat for Big Energy while flipping Joe Average the bird. The people who voted against this are the ones who are pushing the "supply vs. demand fundamentals" argument the hardest.

On that, we agree 100%. That is EXACTLY what is happening...

It appears that our regulating agencies are no longer protecting the Average Joe, they are protecting the big money players. Note bank bailouts, etc.

The way I see it, we are being lied to constantly in regards to the world markets.

Welcome to the real world. One of the most rewarding jobs in the world must be in regulatory agencies when the politicians come to tell you the results your investigations are... Zero research anyone?

[Bradley Walker]

no intention of betraying their generous Big Oil benefactors.

I honestly do not believe that Big Oil is not contributing, for the most part.

I think the Arabs have been saying that speculators were driving up the prices all along. Of course, Exxon is being pretty quiet... ha ha.

[IowaDiscGolf]

no intention of betraying their generous Big Oil benefactors.

I honestly do not believe that Big Oil is not contributing, for the most part.

I think the Arabs have been saying that speculators were driving up the prices all along. Of course, Exxon is being pretty quiet... ha ha.

Indirectly they've clearly contributed, their powerful lobby shoe-horned the drilling provisions into the bill I mentioned. A great way to torpedo the legislation.

[Bradley Walker]

Washington Post Story:

A Few Speculators Dominate Vast Market for Oil Trading

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/20/AR2008082003898.html?hpid=topnews

But when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising to the commodities markets was the massive size of Vitol's portfolio -- at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange.

The CFTC, which learned about the nature of Vitol's activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency. That figure may rise in coming weeks as the CFTC checks the status of other big traders.

[Bradley Walker]

Commodities Bubble Bursting Is Big Large Investment Funds

http://www.bnd.com/business/story/459241.html

The deflating commodities bubble is claiming its first casualties as large investment funds absorb staggering losses from bad bets that prices for oil, precious metals and grains would keep going up.

Hedge fund operator Ospraie Management LLC notified investors Tuesday that it's closing its flagship fund after it suffered losses in August on positions in energy, mining and other natural resource-related stocks that left the fund down nearly 40 percent year-to-date. It's believed to be the first hedge fund to go bust in this latest commodities boom as prices come crashing down after a historic bull-run earlier this year.

And the bloodletting may have only begun.

[Bradley Walker]

Months later...

Oil dropping like a stone with no end in sight. Should see gas under $2 before Christmas (we will never see $1.50 gas ever again huh????)

Investment banks crumbled, all but gone completely from the landscape (pumping up the commodities markets with funny money).

Hedge funds collapsing left and right (not driving up the markets?).

OPEC meeting to slow oil production due to massive over production (I guess they were not manipulating the market after all, HUH?).

Bubble... fake money bubble. Nothing at all to do with oil. Same with housing, commodities, gold, etc etc etc etc etc

[Solty]

I have to agree with you Brad. i've been researching this for fun and learning about the fuels bubble. It's all speculation and Bush wanting to preserve his financial future.

[Bradley Walker]

I have to agree with you Brad. i've been researching this for fun and learning about the fuels bubble. It's all speculation and Bush wanting to preserve his financial future.

Bush?

Which one? The idiot or the evil genius?

Poor Bush, everything is his fault... not.

This was Wall Street and the new "world markets" at work, Bush was too busy fighting terrorists to care. BTW, the new world markets were created under Clinton's watch. Not Bush.

[zealot]

good info! im proud to be a member of a community where stuff like this does get posted in general.

[Bradley Walker]

I predicted gas would get under $2 again after the funny money bubble burst.

It will be under $2 here in Texas here in two more weeks.

I predict $1.50 by Christmas.

Any takers?