Surprise oil release targets speculators

[LetTimmySmoke]

Source: MSNBC

Thursday’s release of 60 million barrels of crude reserves is not about keeping oil consumers well-supplied. It’s about chasing oil speculators out of the market.

And it seems to be working.

“This is the straw that breaks the camel’s back — this is the tipping point,” said Fadel Gheit, oil analyst for Oppenheimer, a leading investment bank. “The speculators will have to change their positions. Instead of betting on higher prices they have to bet on lower prices."

Bursting the speculative oil bubble would also provide stimulus to a weak U.S. economy – at a time when both the Fed’s monetary stimulus and the government’s spending stimulus are winding down.

News of the oil release sent gasoline tumbling 14 cents a gallon in the futures markets. That’s the equivalent of about $56 million a day in savings at the gas pump — or about $20 billion a year, according to Peter Beutel, and oil analyst a Cameron Hanover.


Read more: http://www.msnbc.msn.com/id/43510170/ns/business-going_green/

[tridim]

1. It's fun watching the price of crude collapse on the financial sites.

It's also fun watching the oil industry's paid trolls freak out on the financial message boards.

[GillesDeleuze]

30. uh, you do know that 20m. barrells is about 1/100th of the oil we use

every year.

yeah, there will be a down tick on the commodities market for a day.

and watch the price climb right back up because of weak euro and weak dollar.

gold took a crash for a day too, because of interest/qe3 announcements. it too will climb right back up.

[boppers]

50. It's not about the long term.

It's about smacking speculators in the face, and making them lose huge amounts of money.

[GillesDeleuze]

55. uh, its a zero sum trade. for every $1 a speculator loses

another makes it on the opposite position.

[boppers]

58. The traders betting on increases lost.

The problem has not been the folks betting on losses.

[GillesDeleuze]

59. i would be curious to see the timeframe on the "long" trades

whether traders are popping in and out for noisy gains of if these are month or longer swing buys

[denbot]

93. Options are priced too high or unavailable more then 4-5 month in the future.

You pay for "time" so it becomes too expensive to trade option contracts with a lot of time. Future contracts are too risky (the possibility of infinite risk) to trade too far in the future.

[vanbean]

64. "Uh" should be reserved for vocal speech.

[gtar100]

91. uh, it's a blog post...

[denbot]

92. uh..

huh?

[DeadEyeDyck]

68. Exactly

exept for hedge fund holders

[TrollBuster9090]

72. Not a zero sum game if you count the number of speculators that just went BUST

This coordinated effort by the U.S. and European governments to smack oil futures speculators in the face, and hopefully bankrupt a few of them, is enough to renew my faith that government MIGHT still be (occasionally) on the side of middle class voters.

[customerserviceguy]

83. Admittedly

if it makes speculators more skittish about getting into the oil market in the future, it's a good thing. But I don't expect the effects to be terribly long lasting. Eventually, they'll come crawling out from under the refrigerator and the stove, just like roaches always do when they sense the can of Raid is empty.

[Donnachaidh]

95. after all the huge amounts of money already made, while he dithered around

Dropping 1/10th of what we use AFTER the raping and pillaging is done is nothing more than a PR move, for election purposes. But hey - it gives the herd something to moo about.....

:eyes:

[elleng]

2. Sure hope so.

[onehandle]

3. Is this why the Stock Market is tanking today? Down -178 so far -1.48%. nt

[denverbill]

4. No, it's tanking because Cantor walked out of budget talks with Obama. n/t

[TrollBuster9090]

73. Or maybe it's tanking because Gingrich closed his revolving account at Tiffany's.

Who knows. The market has been jittery since 2008. It may dip, occasionally...but at least we're no longer in danger of having a BUBBLE burst. It may drop 1.4% in a day, but it's not in danger of dropping 20% in a day anymore.

[wordpix]

99. I think it's b/c Sarah Failin stopped her bus tour---or maybe b/c Wall St. has proven to be

a big casino unworthy of investment with its Ponzi schemes, hedge fund schemes, real estate schemes, and corporate heads making huge money while firing thousands of US workers and sending operations overseas. :grr:

[n2doc]

5. Could also be due to the fed's comments yesterday

and the end of QE. Several indices have broken below 200 day moving averages, and this spooks traders as well.

[GillesDeleuze]

35. ^^ most likely.

interest rate/qe3 announcement is a real trump card.

[JDPriestly]

21. The release of the oil reserves is more likely to raise stock market prices

than to lower them. High oil prices mean less economic activity because oil and gas expenditures suck the oxygen out of consumer purchasing and confidence and push the markets down.

[onehandle]

25. That's what usually happens. But Wall Street has a President to remove so all bets are off. nt

[stockholmer]

61. a president to remove?they bloody put him in there + made sure he's surrounded/directed by their ilk

[TrollBuster9090]

74. In 2008 hedge fund contributions to Dems v. Reps was about even. Have you seen them lately!?

There's no contest anymore. After Dodd/Frank, Wall Street is determined to blast the Democrats out of office with dynamite if necessary.

It's probably a good thing, however. It means that, for better or worse, Dems are not getting any money from Wall Street, so they may as well start thinking of ways to get it from ordinary voters by actually doing something on their behalf.

[GillesDeleuze]

36. US market is not consumer driven anymore

its become metafinance.

[ck4829]

6. Good, need to keep these speculators far away from oil as much as possible.

Because they don't have a clue what they're doing.

K&R.

[haikugal]

7. Is this really meaningful

when nothing is done to curb the speculators ability to treat necessities as commodities?

[dkf]

8. You mean when you treat commodities like commodities?

What commodities aren't necessities?

[haikugal]

12. actually I wonder why 'necessities' can be treated as 'commodities'

so some rich people can make a buck while the poor (and the rest of us) lose. How does this action help anyone beyond playing a 'game'....

[GillesDeleuze]

31. um, because the futures market/commodities are critical

to farmer finance?

[safeinOhio]

38. That is great for actual users.

Not so critical to hedge funds and banks. Just pass a law so that speculation requires the ability to take delivery. That way those that rely on futures can still do so without the big money turning the market into Vegas.

[haikugal]

63. Agree....

[safeinOhio]

37. The deal is, everyone can cut

gas use by 10 or 20%. Drive less and drive slower. You might even reduce your gas consumption by half. If lots of folks did that, we could screw the big money hedge funds and banks.

[HillbillyBob]

46. We have done so. When the old minivan finally croaked

we replaced it with a Nissan Versa 34 36 mpg (keep the thing clean and waxed oil and air in tires topped up. swap out your air filters for K&N cleanable reuse air filters (that is 2 or 3 fewer filters in the land fill per year and you get 1 or 2 mpg increase..on our pickup it was 3 mpg).

You can also make a dent by making your home more efficient. As old lights / appliances die off look for the most energy efficient (and check independent customer reviews for repair,how well it works etc.
Our bills are down from 450 to 200 using AC, or from 3300 kilo watt hours to 800 to 1400 kwhrs.. Cooler, better light, the front loader washer uses much less soap like 2 table spoons per load, saves wear on clothes, the gentle cycle will wash silks and other delicate stuff so you dont have to take it to the cleaners. 128 oz bottle of ecos costs 15$ and in this machine lasts for almost a year and we farm we get clothes dirty.

We recycle, try to buy less packaging(plastic=petrol), try to keep people from sending me junk mail.
My idea is "Well Im broke I can boycott everything nearly!" if we don't buy their products that cuts it to the $ they can use against us.

[IthinkThereforeIAM]

84. Yes...

...I have been following that philosophy for years now. Why buy products from companies that I know are going to use their profits made off of me to pay think tanks, politicians and others to screw me over. I have mentioned that to people from time to time and they agree and do the same thing.

on edit: misspell

[stormpilot]

53. I got rid of my car altogether

about four years ago. Public transpo/biking/walking for me!

[24601]

65. Gold, silver, platinum. With apologies to Monty Python's "Life

of Brian"..."All the gold I could eat."

http://en.wikipedia.org/wiki/Commodity

[Auggie]

14. +1

[TrollBuster9090]

76. I agree with you there! The new commission brought in by Dodd/Frank was supposed to

curtail speculation on crude oil, but the committee they put in isn't doing their job. This is a dramatic, executive branch move designed to do what the commodities commission is supposed to be doing, but isn't.

http://vtdigger.org/2011/05/26/sanders-demands-that-commission-curb-oil-speculation/


This is a desparate attempt to accomplish what the commodity trading board is supposed to do, but isn't. Probably because they're being bribed or influenced.


Imagine you had a police department that was supposed to be arresting drug dealers, but wasn't because all the cops were taking bribes. Then imagine somebody got desparate enough to flood the drug market with cheap drugs to drive the dealers out of business. It works, but it would be simpler to get the damned cops to do their job.

[Frustratedlady]

9. So, this is why Bush the Kid wouldn't release any of the reserves?

It would screw up the speculators?

Can't we score a point for Obama? Now, they won't know which way to go or when he might pull another release.

[DCKit]

10. Totally agree.

Then again, they've already made so much off US, the only ones who are going to get hurt are those who were late to the game.

However, it may make the vultures at Goldman Sacks think twice. Losing money is the ONLY thing they can be fired for, apparently.

[LetTimmySmoke]

13. Lesser Bush wanted high oil prices.

It meant more profits for him and his cronies. Except in 2004 when he wanted prices to drop just for a little bit to get him reelected.

[totodeinhere]

15. Actually he did release some of the reserves after Hurricane Katrina. n/t

[lark]

18. Yes, I definitely give props to Obama for this

:toast:

[JDPriestly]

22. Yes. Obama's score was very, very low with me. This move

shows a little confidence and energy in the right direction. I think Obama gets more than one point with this strategy.

I am happily, extremely happily shocked by this. Great news!

[Dreamer Tatum]

28. Please check your history. nt

[Maven]

11. Sorry, I don't buy it.

[Incitatus]

107. Maybe they just want to appear to be doing something about it.

It would be nice to see regulations changed on speculation. So people can't control so much oil at a fraction of its cost. I wonder if anyone was tipped off about the release from the reserves and sold short.

[totodeinhere]

16. The US contributed 50% of the total release. Every other country in the world including

oil rich OPEC countries combined contributed a total of 50%. I am sick and tired of this country having to contribute more than it's fair share to world problems.

[GillesDeleuze]

34. to be fair, we consumer far more oil

than anybody.

[totodeinhere]

44. India and China are catching up to us fast. And they will soon pass us in oil consumption. n/t

[Nihil]

98. I agree with you.

> contribute more than it's fair share to world problems.

There's no country on this planet that contributes more to world problems ...

:P

[liberal N proud]

17. Someone needs to chase the speculators off the planet

They gamble with the markets so they can make a huge profit.

[GillesDeleuze]

32. those same "speculators" also ensure farmers have cash flow

its a two way street, but it ain't a FAIR two way street.

[farmbo]

85. Not true...Farmers can forward contract or buy put/call options..

to protect themselves in a weather market. They don't need (or even want) speculators in the markets.
Each bushel of corn now trades about 20 times before it's finally delivered to a consumer. It's freakin' insane.

Speculators are a bane to the farming economy. Any entity that is not capable of taking delivery on the underlying commodity should be banished from the markets, be it ag commodities or crude oil.

They perform no useful societal function and they artificially elevate prices at the expense of consumers.

[JDPriestly]

19. Great news. This is smart. A lot of small-time speculators will lose money -- deservedly.

[BadtotheboneBob]

20. Surprise!

LOL!... Dontcha know there's gonna be a whole lot of speculators being lounge lizards tonight drowning their sorrows... Poor babies! LOL!

[bluestateguy]

23. It's the only good economic news of the day

It will lower gas prices, and that will free up more disposable income for people.

Don't pee in my Wheaties.

[harun]

24. Bout time they go on offense against the looters.

[midnight]

26. Is this turn around sound like fair play... I think so. Make the speculators

speculate on lower prices... Fadel Gheit... You are truly brilliant....

[slackmaster]

27. My brain read "spectators" and I got an interesting image in my mind

Something vaguely like this.

[think]

29. The Drudge Report linked to this on Yahoo so obviously Matt's trolls are posting against this LOL!

What a silly bunch they are.

http://finance.yahoo.com/news/Obama-releasing-30M-barrels-apf-2233806614.html?x=0#mwpphu-container

[GillesDeleuze]

33. im neither for it or against it

but i think the prospect of 1/100th of us oil consumption annually wont do much to prices in the long run

[think]

39. Hopefully the speculators will think twice next time they try to drive the price up...nt

[GillesDeleuze]

42. doubtful, market makers aren't driving the price

its a non-institutional problem...

[sulphurdunn]

40. Oil prices had peaked anyway.

Most likely the big players knew this was coming and have already taken short positions. Some people make money going up and coming down.

[Turbineguy]

41. Mini-brains on CNBC in turmoil

There's a crazy guy who can screw up the markets. That's right. It just got harder to fuck America. Get used to it.

[sarcasmo]

43. Good deal, 56 million a day in savings that can go back into the economy.

[bobburgster]

45. Good, I hope some of them lose big money! n/t

[GillesDeleuze]

47. Those markets are zero-sum

Since there are no deliverables (these are speculators, not actual purchasers), they are winning from or losing to other investors. the brokerage takes a rake, but thats about it for $ in and out of the system.

[Amonester]

48. The world economy is taken hostage by a bunch of casino junkies!

How do we get rid of them?

[GillesDeleuze]

56. How do you keep investors out of a system of investment?

you got me!

[The Green Manalishi]

62. Speculators should be hung

The only issue being rope or piano wire.

[L. Coyote]

49. Bankrupt the bastards so they go away for good!

This is soooooo overdue.

[nichomachus]

51. Woot woot -- the Republic is saved

[galileoreloaded]

52. And in other news, it enriched greatly those on the other side of the trade, namely me!

oh, and whoever else this was intended to enrich. (read the chosen few)

Yay money!

[GillesDeleuze]

57. anybody who knew about the release took a short

with no need to hedge on the long.

[galileoreloaded]

69. Snappin' puts like a mother fu@#$in' bankster yo! What an AMAZING day!

On my way to the Lexus dealer.....

[Corruption Winz]

54. To think, cutting back a few pennies saves all that money...

Obviously, I can understand why oil companies wouldn't want that. It would only help out nation upon nation.

[BREMPRO]

60. the US Chamber of Horrors came out to strongly criticize this move.. in other words

it's a brilliant move!... ahead of Saudis raising their output this put the damper on out of control commodity speculators and could very well put the economy back on growth with oil prices moderating... not a long term solution tho.. we have to get off this heroilin drug...


Chamber = republican party

[napoleon_in_rags]

66. That will be really interesting.

The question is what will it do across the markets, how married are oil and everything else? My sense is that its central in this whole economy, and the downturn and high prices are hopelessly intertwined. This can reinforce that idea or draw it into question. But of course, long term releasing 30 million barrels from the strategic petroleum reserve to lower prices is no solution to the problem if they are intertwined.

[galileoreloaded]

70. Bretton Woods II and petro-dollar recycling=kablooie baby! n/t

[DeadEyeDyck]

67. It won't do anything - even in the short run

Options traders will just take the short side. I wish you people understood market forces. Option traders actually stabilize the market by guaranteeing a future price. Futures trading came about to insure farmer's could get a reasonable price for their yield. Blaming oil prices on trader's is a red-herring. Trader's gernerally make their money among themselves by trading options. They extract little from the market.

By the way, the government could be held guilty of violating the Sherman Act.

[scarletwoman]

77. It would be a lot easier to read your post if you hadn't stuck a bunch of apostrophes where

they don't belong. (hint: apostrophes are NOT used to indicate plural nouns)

In any case, I call shenanigans on using farmers (plural noun, no apostrophe) as a justification for the activity of speculators (plural noun, no apostrophe) who are not trading in anything tangible. They are doing nothing but gambling on the outcomes for the people who are doing the actual work of producing a tangible product, and the prospective buyers (plural noun, no apostrophe) of that product -- the people who are "taking delivery".

A speculator who has absolutely no intention of actually taking delivery of a tangible product is doing nothing that contributes to the flow of economic activity in the real world.

And it is offensive in the extreme to invoke the fates of farmers -- who actually WORK for a living -- in order to protect the parasites whose only goal is to accumulate as much personal wealth as possible.

We protect such parasites at our peril.

sw
(edited to revise a prepositional phrase)

[larwdem]

79. STABILIZE

THEN IT SHOULD HAVE BIN THE MOST STABLE FUCKING MARKET IN THE WORLD

[ProfessorGAC]

101. You Couldn't Be Any More Wrong

In fact, as it relates to oil, the exact opposite effect to what you describe has what has actually occurred since the early 1970's.

And, they don't guarantee farmers anything, because sometimes speculative investors bid the prices DOWN on futures when they anticipate bumper crops. So, the farmers you think are "protected" are going into the year knowing they're not going to make what they made a prior year.

That's not a stabilizing force.

Lastly, anytime there is a layer of cost and/or profit taking for which there is no tangible value added, it is a macroeconomic drag.

That's it for now, because i don't have time to address your more fundamental misuncerstanding of capital structures.
GAC

[2Design]

71. speculators = rich tax cuts = doubly hurt the middle and poor

[Fool Count]

75. I don't know how is that going to hurt speculators.

They will just buy more cheap oil now for speculating at some later time when the prices climb back up.
This oil reserve release is still a good move because the cheaper oil serves as an equivalent of much needed
economic stimulus. And the beauty of that is Obama doesn't need congressional approval for it. It's like
injecting money into economy by a Presidential decree. It will sure cost US Government money, as they
will have to replenish the reserves with more expensive oil, but that's just a cost of stimulating the economy.
For that to have any noticeable effect though Obama needs to at least quadruple the amount and aim for
dropping the oil price by at least $30 per barrel. That's doable if he had the will for it.

[NickB79]

78. So, when oil prices shoot back up, will we still blame speculators?

Now that we're actively slaying the speculators, and oil prices shoot back up over $100/barrel again (which they inevitably will), will people finally realize something more fundamental is happening in world energy markets? Or will we find a new scapegoat to chase around with pitchforks and torches?

[GliderGuider]

81. +1

"We" won't blame speculators. "They" will blame speculators. We need to sentence everybody on this thread to a month on The Oil Drum.

[Canuckistanian]

80. How long does it take to change strategies of betting "down" instead of "up"?

I'm thinking it must be in the minutes range. And if it's a computer algorithm, milliseconds.

I don't see how this ends speculation entirely.

[GliderGuider]

82. I'm pretty sure half the speculators out there made out like bandits today. nt

[Canuckistanian]

86. Hey, GG

Good to hear from you.

[GliderGuider]

88. I've been noticing you around here and there too.

:hi:

[Canuckistanian]

89. We need to have a mini-meetup

D'Arcy McGees is still there.

[KurtNYC]

104. it doesn't end speculation, doesn't claim to

and one can lose millions in a few minutes in the commodities market when something unforeseen happens. Trading on margin relies on smaller moves in the market -- big quantities with small moves in price. Once it it big quantities AND big moves you can get cleaned out easily. It messes with the SOP of commodities traders.

And btw anyone who knew this was coming probably made a fortune shorting oil futures.

[Rosa Luxemburg]

87. They should speculate on compressed air

much easier to obtain

[brewens]

90. Now who was tipped off and shorted the market? Maybe they

can't pull that the way they can with stocks? I don't really know that. If they can, it's a sure bet someone makes a killing on this.

[Hubert Flottz]

94. They have targeted us long enough.

I hope they all starve to fucking death.

[Donnachaidh]

96. the raping and pillaging by investors was already done - prices were going down

So -- this was a photo-op. Nothing more. :shrug:

[Name removed]

97. Deleted message

Message removed by moderator. Click here to review the message board rules.

[wordpix]

100. "ongoing loss of crude oil due to supply disruptions in Libya and other countries"

Actually, O appears to be targeting Big Oil in Libya and other countries, who are no doubt lobbying the admin. to put boots on the ground to ensure their Big Oil profits.

[Hippie Puncher]

102. Obama just took the Repiglican Queen.

Energy prices determine the price of everything else.
If this doesn't give our Economy a kick in the pants, nothing will.

[Commie Pinko Dirtbag]

106. No, seriously. Somebody registered as ''Hippie Puncher''? ROFL!

:rofl:

[John Paul Jones]

103. What...? The price of oil has been dropping for weeks....

[sarcasmo]

105. This needs to stay on the main page.