Posted on 07/13/2009 1:31:38 PM PDT by FromLori
Big speculators such as hedge funds and investment banks have sharply reduced their buying positions in oil futures in recent weeks, just as regulators are considering setting limits in energy speculation.
The drop in speculative positions likely contributed to last week's 10% slump in oil prices -- the biggest weekly loss in six months, analysts said.
Long, or buying, positions held by non-commercial traders, a category the regulator uses to classify big speculators, dropped by 16,382 contracts in the week ended July 7, according to the weekly Commitments of Traders report released by the Commodity Futures Trading Commission late Friday. One contract represents 1,000 barrels of oil.
That's the biggest drop in four months in oil futures traded on the New York Mercantile Exchange, according to COT historical data. Long positions held by speculators now stand at the lowest level since the week ended May 26.
Meanwhile, speculators increased their selling, or short, positions, resulting in a 60% slump in net long positions. Net long positions held by speculators now stand at 15,357 contracts, the lowest since May 12. See the latest COT report.
The change in speculative positions came as the CFTC announced on July 7, that it's considering setting limits in the number of positions speculators can take in the energy futures market. See full story.
The CFTC will hold a series of hearings starting from later this month, said David Gary, a spokesman for the Washington-based agency.
Oil prices tumbled nearly 6% in the two sessions ended July 7 on the Nymex. Over all, futures lost 10.3% last week -- the biggest weekly loss since the week ended Jan. 9.
In Monday's trading, oil prices continued to slide, falling to the lowest level in two months as demand concerns weighed on prices.
(Excerpt) Read more at marketwatch.com ...
Is this good?
Now wait a minute - oil speculators leave the oil market. The price of oil slumps. Seems to me the point has been made that speculators are artificially elevating the price of oil, or exaggerating disequilibria when they occur. And please don’t start talking to me about economics, I’m better versed than most. I’m looking at results and outcomes here.
Well I guess it is for us not having to pay such horrible prices for gas.
Vegetarian, anti-gun, anti-smoking, anti-speculator, any doubt liberals and nazis are connected at the hip?
the fact remains that demand for oil is not elastic.
we may use less of it but we will always use some.
More when the ‘global warming/climate change’ patterns
hit and blizzards/whiteouts blanket the NE/atlantic seaboard.
No but I sure do like the lower gas prices lol.
Every dollar that’s been spent on crude oil above the 35-45 a bbl range has been nothing more than speculator greed tax. This is a long overdue and very good thing.
DITTO. Market was design for users of oil to lock in prices, not non users to use it as a casino to distort the swings to the point that they cause recessions and booms.
The feds have noticed that the screaming is lessening about gasoline costs at or about $3/gallon. I suspect that they are clearing the playing field to raise taxes to capture the three dollar revenue.
What does this mean?
So-called "speculators" provide the equity that keeps many futures markets efficient. If it weren't for "speculators" it wouldn't be so easy for farmers or ranchers to hedge against price fluctuations or to lock in a price they like.
Yes, this is real good. For example, during last years election cycle the price of oil rocketed to almost $150/barrel despite the global glut. This spike didn’t help Republicans because Dems used the “crisis” as a campaign tool. Then the Muslim gets into the White House and the price of oil sinks to $40/barrel. Then, we hear a Goldman Saks story were they purchased numerous oil futures during the election campaign and stored the oil in massive tanks in Connecticut. Now, G.S. is getting very sweat deals from the Muslim. Coincidence? Sounds like a soap opera story, but it’s all true.
It means they are selling off their stockpiles they held waiting for the prices to go up because they do not want to deal with the government regulators so there is more stock and gas is cheaper.
no.
its never good when govt meddles
Bill O’Reilly probably has a wide smile across his big, ignorant face.
This is the problem for Republicans - they did not notice or did not care that working men and women, that business owners are paying for speculation which is not about the market of supply and demand of oil. Thus they let people trade oil on futures and margins with a tiny amount at risk - that kills the true market. The Republicans should have been all over this topic years ago when the rules of the market got out of hand.
“And please don’t start talking to me about economics, I’m better versed than most. I’m looking at results and outcomes here.”
Drawing conclusions about results and outcomes has nothing to do with economics. Right.
And you’re so well-versed in economics that you don’t even want to talk about them. Right.
True, and even the legislation they’re considering won’t eliminate speculation. But the correlation is stil there - speculation decreases, the price drops. I don’t want to interfere in free markets any more than necessary. In this case, oil goes to people who produce, not people who endlessly hand stuff back and forth.
Why?
Agreed. The split between buy and sell price will widen, because all those evil speculators are no longer there to carry the risk.
Tough luck for people who need to buy oil in the long term ( after this short-term glut finishes). And who will FReepers blame then?
“the fact remains that demand for oil is not elastic.
we may use less of it but we will always use some.”
Prices affects demand in the margin. Raising it a dollar doesn’t have to result in people abandoning their cars and walking everywhere for it to be “elastic”.
I hardly need to convince anybody on these boards about my knowledge of economics, but I sure don’t need to waste my time with some hayseed telling me about supply and demand. In a completely free (and totally nonexistent) market, speculation might act to stabilize prices. In the real world, the one with the birds and the light and the air and stuff, speculators destabilize such markets, or at least elevate prices and create disequilibria. If you want to talk a free market, you need to get on a plane and talk to a guy who looks like he stole the tablecloth from Pizza Hut as headgear. I’m talking about what is, not what could ideally be.
We need a new Governor, one with the cajones to do this.
“This spike didn’t help Republicans because Dems used the ‘crisis’ as a campaign tool.”
I do recall last summer being boom-time for global warming hysteria. But was anyone but the choir really listening?
I also remember “Drill here, drill now!” being popular and tracking good poll numbers. McCain was well positioned to use it against Obama. Then the bailout frenzy hit, and nobody cared anymore.
DITTO. Market was design for users of oil to lock in prices, not non users to use it as a casino to distort the swings to the point that they cause recessions and booms.
So this is the difference? I knew Oil was always traded but didn’t realize the difference.
So it was only intended for the USERS of oil?
Wasn’t the change that allowed this to happen in the year 1999? I thought I heard Dick Morris talk about this once.
But— but— but— but— PEAK OIL!!!!1!!!!one!!!!!!
DITTO. Market was design for users of oil to lock in prices, not non users to use it as a casino to distort the swings to the point that they cause recessions and booms.
So this is the difference? I knew Oil was always traded but didn’t realize the difference.
So it was only intended for the USERS of oil?
Wasn’t the change that allowed this to happen in the year 1999? I thought I heard Dick Morris talk about this once.
“speculation which is not about the market of supply and demand of oil”
I’m at a loss as to how speculation is not about the market. They’re trying to get rich by predicting the future, right? You can say this is one example of the market not working well, but you can’t say it’s not the “real market”. For everything that people do voluntarily on the free market is real. If it’s a problem of their manipulation leading to a bad result, that’s not the same thing as saying it’s not real. Their manipulation is part of reality, as it is in every market on the face of the earth.
“Why?”
Because Bill O’Reilly demonizes speculators like a latter-day Herbert Hoover.
the only downside I see is that we have Pavlov trained the Dems to threaten regulation in order to manipulate markets, and since this apparently worked they are not going to stop with oil.
However, the anti-spec crowd ONLY considers specs as longs, and thus evilly driving up prices. Ho hum. Nor would teaching economics in pulbic screwels help this situation; the 'teachers' would, in large majority, be equally ill-informed or outright socialists/Marxists.
Hardly.
“And as for those enviro-nuts: put the platforms west of Yankeetown and thereabouts. No beaches there, just marshland”
Actually one of the most beautiful beaches I’ve ever been to is just outside of Yankeetown. It is in the looming shadow of a nuclear power plant. Wonderful place and I’d go back again in a heartbeat.
Crude futures only began trading in 1983, as a delayed reaction to the oil ‘’shocks’’ of the 1970s. ‘’Always’’???
Thanks.
“In a completely free (and totally nonexistent) market, speculation might act to stabilize prices. In the real world, the one with the birds and the light and the air and stuff, speculators destabilize such markets, or at least elevate prices and create disequilibria.”
Not to get into economic theory too much (because you’re too much of a realist for it, though apparently are also a master of it), but who ever said prices are supposed to be stable? Heck, I always figured that stuff about equilibrium was a model to contrast with reality, to show people what markets are aiming for, rather than arriving at. I also always figured that the better way to shoot for your dreams and get to equilibrium was not to pursue stability, but rather its opposite: an endless process of trial-and-error.
No.
Good.
Will.
Come.
Of.
This.
I guarantee it. Anytime the government meddles in what a market can bear, it is a disaster. Yesterday, it was corporate salaries. Now it is a roof on speculation. Tomorrow, what is it going to be? A limit on how much you can make by investing? How much you are allowed to be paid in a middle class job?
Once this line is crossed, there will be no stopping it. Every success they have in this type of intrusion only emboldens them to go further and deeper.
And they will. I guarantee it.
I predict gas lines and shortages. Just sayin. But hey, that might be JUST what they want. See my tagline.
Because Bill O’Reilly demonizes speculators like a latter-day Herbert Hoover.
I’ve been trying to figure out why BO still has ratings.
So they don’t expect recovery anytime in the near future?
As hog prices collapsed (cash got down to NINE cents/lb at one point), the open interest kept going straight up in Dec, then shifted to Feb and April.
I have the hard figures in hand, and you can get them too, at cftc.gov. Moreover, this is not the only such example of specs hitting the downside of a mkt viciously; examples are to be had in the crude and products mkts, also. Your generalisation is just silly, and your ''correlation'' ... well, 'laughable' comes to mind.
Well.... probably. The hedge fund positions in energy were/are motivated by the same sorts of considerations that drove the mortgage derivative market.
Speculation isn't bad per se, until it becomes divorced from the realities of the market in which the commodity being traded. Once that happens, the price of the commodity can do very strange things for reasons that have nothing to do with the actual supply/demand balance for the commodity itself.
There's some evidence that the price of oil was "artificially" high the last couple of years due to hedge funds trying to use an energy position to cover their losses in the mortgage market and elsewhere.
Market was design for users of oil to lock in prices, not non users to use it as a casino to distort the swings to the point that they cause recessions and booms.
Of course you’re not going to have stability, but if we’re going to have instability, I say let it be because of real shifts in demand, NOT PERCEIVED SHIFTS. Speculators create artificial shifts in the demand curve (you got me back on theory, hope you’re happy) in an attempt to anticipate a real shift. This is a recipe for a mess - they will either make an error (anticipating a rightward shift when there is a leftward shift) or cause a rightward shift larger than real demand merits, all in the name of lining their pockets. They produce nothing via all this activity, they only flip bits in a bank account’s electronic register. You, I, and everyone else in America pay for this activity, to our detriment. Let the market work by responding to real demand.
It is a reflection of the mistrust people with money have of Hussein. What will he do next? Despite the clear language of our Constitution, ex-post facto laws are common. There is legitimate concern that what an investor does today will be ruled illegal or will be heavily taxed long after the capital was invested.
FDR made the same mistake in 1937. He caused a depression within The Great Depression.
Without oil speculators buying contracts, there will be a shortage of oil. The price may drop, but it may not be available. At prices too low, there is no incentive to produce or distribute.
The open interest in futures has little to do with the stockpiles of the commodity.
“I say let it be because of real shifts in demand, NOT PERCEIVED SHIFTS”
But a shift in perceived demand IS a shift in real demand. Real speculative demand. Hardly matters to me that they’re moving pieces of digital information from place to place, or however it is people characterize it. The same rules apply as in all other markets.
Can’t imagine an economy in which all prices were based on the demand for people to use whatever it is they’re buying immediately. There has to be some place for people who buy in order to turn a profit. There’s a self-regulating mechanism to the process. When speculators make an error, they lose money. That’s the best motivator there is not to make errors.
As for not being productive, there are efficiency concerns. Hedging producers’ risks. Stimulating future production. And probably a hundred other things.
Pure 1000% bullshit!!!
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