Speculators double down on oil

Big traders are betting the ranch that oil prices will keep rising, testing the pain threshold of an economy that is not exactly setting records as is.

Large noncommercial speculators – firms that play the futures markets without taking delivery – added to their long position in West Texas Intermediate crude by 50,200 contracts last week, according to Commodity Futures Trading Commission data.

The surge of speculative money into the oil futures pits shows that big financial players are expecting the price of WTI crude to surge well above the recent $105 or so seen last week. If they are right, it will bring $4 gasoline a step closer.

That will not be good news for most consumers, though it could help some big energy traders score big paydays, thank goodness. You would hate to see the talent fail to get its due.

"It does not get any clearer which way Wall Street is trying to take oil," says Stephen Schork, who writes the Schork Report energy markets newsletter in Villanova, Pa.

Schork notes that speculators now own nearly six times as many barrels of oil – 268,622 futures contracts representing nearly 269 million barrels – as can be stored at the WTI trading hub in Cushing, Okla. And since the CFTC numbers released Friday only go through last Tuesday, they likely underestimate the degree of speculative fervor building in the energy markets.

Olivier Jakob, who covers energy markets for Petromatrix in Zug, Switzerland, estimates that traders added 40,000 to 50,000 crude contracts to their long positions in the second half of last week. That would take them up to seven times the Cushing capacity, a level he calls "extraordinary."

“Your theory fails to account for the fact that commodities are up across the board, across the globe. That cannot be explained by supply and demand alone, and especially in a weak economy - just as the runup in the price of silver in the early eighties was caused by the Hunt brother’s speculation. “

I’m just talking about the latest run-up in oil prices. Overall, it’s more than obvious that the reason prices are souring on everything is the simultaneous printing of dollars, Yen, and Euros. Basically, if you double the supply of fiat currencies, without doubling the economic output to match, prices will double...which is exactly what’s happened here, and to a lesser extent in Japan and Europe.

I know, the last thing we want to do is blame the governments we all elected...since that is blaming ourselves...but that is the case here.

I’m just talking about the latest run-up in oil prices.

But commodities are up across the board - so it is not just supply and demand in one commodity. Your theory has to fit the larger facts, which it does not.

I know, the last thing we want to do is blame the governments we all elected...

Do you even read the posts before responding to them? I put a large part of the blame on governments and central bankers. Central bankers are printing money so that governments can keep spending willy-nilly. Governments have loosened requirements for margins and position limits to allow rampant speculation to the point of market manipulation like we saw with the Hunts 30 years ago. Speculators are simply responding to the opportunities and motivations presented to them by governments and central banks. I don't blame them, but I also don't accept the status quo as anything that is desirable. In a way, the commodities run-up is a form of global tax that is hedging financial institutions from the impacts of quantitative easing. And it is sticking it to consumers right in the shorts, and introducing widespread uncertainty into the economy, which we don't need now.

What needs to change is that the central banks quit printing so much money and that margin reguirements are raised and position limits imposed. To consumers, they don't care why the cost of living is going up, they just know that it is - and for billions, it isn't just about more expensive gasoline, it is the difference between a subsistance diet and starvation.

You’re hopeless. I just addressed that, it’s called PRINTING MONEY.

And I addressed that as well. It's called printing money in conjunction with a lack of position limits on exchanges such as ICE and low margin requirements. All three need to be addressed, along with changes to policies such as drilling moratoriums and ethanol subsidies that push up the price of food staples. You apparently are unwilling to look at the entire picture, so further debate is pointless, you may have the last word.

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