A Few Speculators Dominate Vast Market for Oil Trading

WP ^ | 08/21/08 | David Cho

[TigerLikesRooster]

A Few Speculators Dominate Vast Market for Oil Trading

By David Cho

Washington Post Staff Writer

Thursday, August 21, 2008; A01

Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses.

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 discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators.

[dennisw]

Would you care if Vitol was a vehicle for massive Russian speculation to jam the oil price higher? Somehow in this oil bubble there are Russians and Iranians forcing oil/energy higher and higher via the commodity markets.

Now why would they be doing this?
Would a country that brutally invades Georgia over a competitors oil pipelines be capable of such dastardly deeds?

[Straight Vermonter]

ping

[dennisw]

First off, you can’t sell huge volume at one price. You can’t even sell a moderate volume at one price. That price only exists for a small quantity...you just take it for granted that you can sell Google at the quoted price because you’re moving such insignificant size.

The second someone tries to move real size, they’ll have to start paying down into lower bids. On top of that, if they’re anything significant, bids will cancel. That means they’ll be selling at bad prices.

Wow
It sure sucks to be a large speculator
Why don't you tell the to Vitol
And tell it to Goldman Sacks who agitated until the rule was altered in 1992 to allow them to take outsized positions too, not just firms involved directly in oil/commodities who needed to do some honest hedging

[dennisw]

Those engaged in this sort of thing are not few, are not capitalists trying to make an honest living, and are not friends of the United States.

Please wake up. We are at war.

Russians? Middle East Investment funds?
Using our own markets to harm the United States

[ovrtaxt]

Exactly. If we embark on a serious energy plan like the American energy Act

http://www.govtrack.us/congress/bill.xpd?bill=h110-6566

the price of oil will tank hard and fast.

Remember a month ago when Bush lifted the executive order on offshore drilling restrictions? The market responded and dropped $30/ barrell in two weeks or so.

The market isn’t the problem, government policy is the problem.

[RegulatorCountry]

There was an article from Reuters covering a governmental paper released by the CFTC, several weeks ago. Very peculiar, circumspect language, referring to an unnamed “very special trader.” This “very special trader” was reclassified as speculative, and controlled 460 million barrels of oil. Nearly US$60 billion dollars at the time. That’s well above 11%.

[RegulatorCountry]

Found a link to the Reuters article I mentioned:

http://www.reuters.com/article/governmentFilingsNews/idUSN0535661120080805

[JasonC]

You still just aren't getting it. The point isn't to get filled at good prices and get out lower. The point is to drive the price to zero and destroy US financial institutions and the underpinings of the economy. Which part of "we are at war" is giving you trouble? You think our enemies are above intervening in our financial crisis? You think they give a damn whether they turn a profit on every trade? If they can cause a trillion in pain in the US for a few measly millions, it is cheaper than ICBMs.

Please wake up. Ordinary speculation, no problem. It is not, repeat not, the only thing actually occuring at this time.

[GOPJ]

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.

My concern is with the companies buying oil dependent companies on the dips - and selling on the highs. For example, say I know oil's going up in price - and that airline stocks will be going down... or the reverse. I can "time" the market. Just bleed it dry. When there's enough holdings in a small number of hands, it's a cornered market.

[Ernest_at_the_Beach]

fyi

[Ernest_at_the_Beach]

From the WaPost article:

**********************EXCERPT************************

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.

[Robert A Cook PE]

So who owns parts and pieces, or (more likely) controls people who control parts of pieces of this (conveniently foreign-held) Swiss company Vitrol?

[Robert A Cook PE]

And tell it to Goldman Sacks who agitated until the rule was altered in 1992 to allow them to take outsized positions too, not just firms involved directly in oil/commodities who needed to do some honest hedging

Hmmmn.

SO, how many of these commodities investment-rules changes occurred under Bush-the-senior, and how many (later - between 1993 and 2000) under Clinton's (thereby Enron’s and Soro’s and Chinese and Indonesian) influence? Enron, after all, STARTED the global carbon cap-and-trade scenario that REQUIRED global warming as a forcing influence/cover.

Was it only the first commodity that mattered? Or the combination of many changes?

[grey_whiskers]

DING DING DING DING DING DING DING DING DING DING DING!

NO more calls, please.

WE have a winner!

[dennisw]

Hi Mr. Cook
I know you are a very precise person so please excuse my sloppiness on the year  --- It was 1991 so during Bush Sr it seems that commodity trading rules were relaxed to allow Goldman Sachs and other financial firms to take large positions. Large positions were previously reserved for commodity producers and buyers. People in the business, not speculators
Russia plans an invasion of Georgia for four months then seizes on a pretext to invade and has been lying ever since
Why would the Russians not be operating through Vitol and/or others to drive oil futures prices higher. It's a no brainer after seeing their rapacious behavior in Georgia

Speculation accounts for 81% of oil trading volume

Guess who broke open the opportunity for oil speculators to trade oil in a loosely regulated fashion? Goldman. The Post reports that In 1991, its J. Aron unit argued that "it should be granted the same exemption given to commercial traders because its business of buying commodities on behalf of investors was similar to the middlemen who broker commodity transactions for commercial firms."

The CFTC granted this request. More exemptions soon followed, including one to Enron that allowed it to trade huge positions for speculative purposes. The Post also reports that the biggest firm speculating on oil -- which bears the most responsibility for your high gasoline prices -- is a Swiss trader called Vitol, which at one point in July, "held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange." While the CFTC may change the rules to stop such speculation, that's not a long-term concern for Goldman and Vital.

http://www.bloggingstocks.com/2008/08/21/speculation-accounts-for-81-of-oil-trading-volume/

 

[AFreeBird]

Formatting is our FRiend.

[facedown]

No doubt the Bilderbergers are behind this.

[Marine_Uncle]

Interesting to say the least. This crap goes on all the time. And once in a while someone gets caught. I get so pissed off when I see someone cut say a $90 VOM out of it’s package and steal it, from the shelf at my store. Then I read about some real rotten thieves who most probably live in luxury at the expense of many.

[TigerLikesRooster]

Many of them would be hedge funds foreign and domestic.
Foreign ones may not be in it for purely monetary purpose. They may be waging an asymmetric war.