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Posted on 04/20/2006 1:17:48 PM PDT by NYer
Capital movements due to fears over a possible US-Iran war, financial speculation or market meltdown are driving crude prices upward.
Milan (AsiaNews) – Capital movements on commodity exchanges, not low supply are pushing oil prices upward. Brent crude has reached US$ 74 a barrel because of lowered refinery use and a backup in crude inventories that has left many a super tanker waiting to unload. Oil storage has become a problem since facilities are full in the Persian Gulf, Europe, the Americas and even Asia. Even Israel, which built huge embargo-busting oil depots to allow the country to survive every contingency, cannot store more oil. The same is true for South Africa which inherited vast oil storing facilities from its former apartheid regime and now readily leases out its terminals in Saldanha Bay through its national oil company PetroSa.
Yet, if US summer demand for gasoline and energy thirst in Asia, especially in China, are likely to punch a hole in supplies, why are large quantities of oil going unsold or not being stored, and prices not dropping? Oil prices are rising because investment funds are pouring liquidity into commodity exchanges trading in oil. This vast flow of capital needs an explanation. There are in fact three possible reasons to account for the situation.
First, it might be a speculative surge that will quickly drop. Secondly, it could be that some financial circles have insider information concerning US government intentions and military options towards Iran—this might explain rising gold prices now at US$ 640 per ounce. Thirdly, it might finally be that many financial groups are investing in commodities like oil to cushion themselves against a possible, 1929-like meltdown of the international financial system. Symptomatic of the danger is the dismal state of General Motors, the major US carmaker, and the potential impact on US financial institutions of further interest rate hikes.
Well glad to see folks are catching on.. been trying to tell people for at least 6 months that energy futures traders are raping em... but the "market is god" types just kept shouting me down.
Of course, but that the author stated that less use by refineries is causing prices to rise, among other things. That doesn't make sense.
Yea, its supply and demand... supply is so high we can't even store it, and demand is dropping and the price keeps going up... yea, that's classic supply and demand... NOT.
Its called futures trading profiteering, pure and simple. Only difference between whats going on now in the oil futures market and what was going on with tech stocks in 99 is that Oil is an inelastic product.
These folks who think markets are not manipulated or incapable of being influenced or manipulated by forces beyond "supply and demand" and are free from corruption are just abject fools.
The simple approach would be to raise margin requirements thereby increasing the cost and risk of commodities and futures speculation.
When was the last time a company netted 34,000,000,000 ?
Answer: Never.
BTTT
It's not so much the hedge funds. A speculator who buys futures because he thinks prices are going to rise is not doing anything wrong... if he turns out to have been wrong, and prices did not go up, then he is going to lose money.
The problem is that the run up in commodity prices caused by real demand has resulted in Wall Street introducing all sorts of commodity index products that people are pouring money into. These funds have to buy futures, because that is there mandate... it is in essence a bubble just like the internet in 1999.
Sure, unfortunately they are oil investors, or shills.
Because they are not keeping up the same income levels. Charge more to make up for what you are not getting. Remember a few years ago when the gasoline usage dropped over several months because of high prices -- less fuel usage threatens their profit projections, regardless of fuel availability.
There is an even simpler approach: start shorting crude oil futures.
This price is, from a supply/demand curve, completely nuts--as are beliefs that we're going to go to war with Iran any time in the next 3-5 years.
So, in short, it is a speculative bubble, and one that is overdue to be popped.
Remember that in shorting oil, Soros' pain is your gain!
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Total B$, or were you not around when the OPEC Cartel was established?
These embargo's used to be considered acts of war. But the mandated control
of production let US refineries raise their prices. They loved it.
pssst...Have you not heard on this board that capitalists are incapable of greed..no collusion..all legal like.
Collusion? There's no collusion! You don't sound very happy that gas is $3+ per gallon! I'm sorry, that means you are a commie. I mean, come one, you can choose not to buy gas. Unless you want to have a job or buy anything that was treansported.
But it is a totally free market. The industry shills here repeat it like a mantra, so it must be true.
Yeah, we should just give up. Shouting will never cure a terminal case of economic ignorance.
I've tried it on Democrats and it doesn't work on them either.
Of course it doesn't. The energy sector is nuts most of the time, and it is getting nuttier now.
I would love to see where the spec money is coming from.
Mysterio was being sarcastic.
That theory is spot on when prices are rising. But I, and I'd bet one or two other people, notice that the theory breaks
down somewhat, when replacement costs go down...
Guess those pricing people don't understand the art of pricing. Then again, maybe they do.
"...Why would an oversupply result in crude prices going up?..."
Price gouging by those involved.
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