We oil speculators must rejoice today, since prices rebounded after a rather steep fall over the last few days.
Our friends at Goldman Sachs – those fellows who tried to sell the notion a few weeks ago that natural gas prices should triple this winter, despite unprecedented inventories and sagging demand – get some of the credit. Amazingly, the GS folks think that oil is headed to between $85 and $90. What were the odds?
I think the problem we speculators face is where we speculate on oil: At the gas pump, where the speculation is how much more we’re going to pay next week because of the real speculators.
58 Comments
Hopefully the president can find a way to rein them in. It will be difficult though – especially since so much of the speculation in petroleum is global. We need more homegrown nuclear and wind – at least for electricity. Then continue to move to electric cars, hybrids, and other improvements in efficiency.
What amazes me is that people believe Goldman Sachs’ forecasts.
It’s a lot like touting stocks – churn and burn.
It’s a lot like touting stocks – churn and burn.
Sorry… forgot to say great post – can’t wait to read your next one!
Note – that 9/26 4:03 AM “post” was not me – it is a scam website.
Rampant oil-market speculation is taxing American families for the second year in a row. Congress must stop this manipulation before rising prices derail America’s economic recovery. Help do your part to lower energy prices. Take action by visiting by http://www.StopOilSpeculationNow.com.
Why is it that everyone that comments concerning oil, the price of oil, oil manipulation and oil speculation knows absolutely nothing what they are actually talking about and have no clue how the real oil markets work or how the real international oil markets trade. It’s amazing to me how wrong all of you are 99% of the time. I have traded the international oil markets for over 25 years (mainly Singapore) and with the big boys such as Koch and Goldman Sachs.
If you think the price of oil is too high (currently $70/bbl), then go open a futures brokerage account, deposit USD $500,000 into it and go short (sell for 99% of you) the oil market. I am sure the experienced oil traders will be happy to take you out! The market is the market!! Plain and simple. Econ 101.
If i have misspelled any words above, i am sorry. I am just way to busy sitting here in Singapore trading the international oil markets.
Gary B Bauer, Singapore (and proud to be from Wichita)
Sorry, Gary. Too much evidence – WAY too much evidence – to the contrary. Energy commodities are anything but a free market.
garybauer111, 25 years on a trade floor will not open your eyes to the massive fraud these companies are responsible for. Your splash screens won’t disclose the proven off shore hoarding in tankers, flash trading schemes by GS and the others. This is just outright fraud and manipulation that anyone with a basic understanding of our market can easily see. On the trade floor what you see and ‘bet’ accordingly is the end result of such manipulation.
The American public has had enough seeing our oil rise because of ‘expected hurricane season’, ‘estimated winter heating demand’, ‘possible political turmoil’, blah blah blah….things are going to change and coincidentally the ones that have a problem with such regulation are the ones profiting from such unethical practices.
Good summary of a good bit of the evidence that’s out there.
Unfortunately, energy commodities were just one area of America’s financial sector left WIDE open to abuse by deregulation. Each and every one of us have paid a severe financial price for that deregulation.
rickofcas — First of all i do not trade on a trade floor, that’s a future exchange btw. I work on a proprietary trading desk in an office and trade oil internationally via futures, forwards, options and over-the-counter swaps and other derivatives along with crude oil and refined products physically. I actually move/arbitrage physical crude oil and refined products worldwide and hedge these physical moves via futures and swaps. My electronic trading screens show me where the oil markets are trading live by willing and able buyers and sellers transacting business without manipulation and/or fraud. It’s a free competitive market!! There is no massive fraud going on. Trust me. If there was massive fraud or manipulation going on, i would have retired 10 years ago and now be on my yacht off of Monte Carlo sippng Dom Perignon champagne, eating beluga caviar and with plenty on campanionship if you know what i mean!!
You talk about “proven offshore hoarding of oil in tankers”. What is wrong or illegal with that. Nothing!! It’s a god given right. In a contango market (ok go to wikipedia) 90% of traders and refiners will take onshore tankage or vessels to store oil on the water and play the contango game. Opposite of a backwardated market. (ok go to wikipedia again). Why sell oil today when you can sell it 1-3-6-12 months later at a highier price than today if you can cover your tankage fees, TVM and other carrying costs. There is no outright fraud or manipulation here. I can see you have no basic understanding of the oil markets. Approx 80-90% of all commodity markets worldwide trade in a contango market going forward and playing the carrying game is just good normal business.
Also the oil markets trade off of current fundamental news (and technical analysis) but also on possible futuristic expectations that can change the future markets and/or prices. Where have you been?? This makes complete sense to me!!
I am not trying to be arrogant here, but again it makes me mad when others talk about blatent fraud and manipulation in the oil markets and they have no clue what they are talking about. They have no experience in the oil markets at all. I have never seen it or ever been apart of it. Again, if you think the price of oil is artificially too high, then go sell it. Put your money where your mouth is!
Also keep in mind that the United States is one of the few places in the world where a gallon of gasoline is cheaper than a beer. The price of a gallon of gasoline in Singapore is approx three times as expensive and no one is complaining!
America contains approx 4% of the worlds population but consumes 25% of worldwide energy produced every day!!…..Think about that!!!
Gary B Bauer Singapore
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mLwR7C I want to say – thank you for this!
garybauer111, you say that there is nothing wrong with offshore hoarding. Curious, what is your opinion on the companies that intentionally report inaccurate supplies either in shipment or storage in their favor?
You support market fundamentals of supply and demand yet gloss over the fact that this years price spikes have no correlation to such supply/demand fundamentals. You mention ‘futuristic expectations’ as a price increase reason which is exactly what the American government is out to stop. One Nigerian rebel should not have the power to move the entire global oil price because of few rogue traders anticipate WWIII.
I’m sorry but you see the end result of manipulation nothing more. I have been a data analyst for energy companies, mainly oil and gas, since I graduated high school. The data you see and invest accordingly is data I and my team create (though probably not specific to your company), sometimes reviewed and edited by my superiors. From my experience the more political turmoil in the news the more my data is scrutinized behind closed doors.
I wouldn’t expect the cashier at Conoco to understand how manipulation works since they are trained to operate the cash register much like you are trained to invest based upon data that is given to you. Traders don’t care if the data is accurate or not, it only matters that the data is authentic. They don’t care if the well is slated to be killed or if a tanker is stranded in port because of mechanical problems, they care about numbers on a screen or paper and from that it is impossible to know what goes on behind the scenes.
Remember last year Richard Arens who willingly pushed oil above $100 for the bragging rights to tell his grandchildren he was the first to buy oil at $100? Supply/Demand? That was the tipping point for the American public. Even BP has been accused and fined for manipulation and more will soon follow –quote from a BP trader “… we could control the market at will.”. Please understand my frustration when I am accused of knowing nothing about the oil market when my entire property, home, vehicles, and son’s college tuition has been paid for by long hours analyzing, compiling, and presenting data to big oil.
BTW- You were correct to label the contango market as a “game”, we like to call it the “glo-bull shuffle”.
Excellent detailed post, Rick. Appreciate the perspective.
Supply and demand is nothing more than a canard – a canard that the American people don’t buy anymore. Time for Obama to move on speculators.
Bill, Rick – TRUE!
The cynic in me might comment that it comes as no surprise that a speculator claims there is no problem with speculators …
I’d reiterate that one of the nation’s most successful oil speculators has dropped out of the market, along with the natural gas market, as he’s forecasting a crash.
N3hfUh I want to say – thank you for this!
k34VGv I want to say – thank you for this!
rickofcas — i just need to say that i have many comments to make on your latest comments. I am just short of time this second as it’s approx 8:15pm in singapore and just leaving the office from all day of trading the international oil mkts without fraud and manipulation and have a dinner with an Indian oil refinery company.
Again 95% of your comments or ideas are wrong. The true markets especially the oil markets do not operate this way. By the way, we are all entitled to our opinions. I truely beleive this.
But if you do not beleive in the basic principles of economics of supply and demand then i am just wasting my time here. They do work — trust me. I will pay for you to go to WSU and take Econ 101 and 102 but if you do not get an “A” in the courses you need to pay me back as obviously you did not get it!
Forget all your data — all the data you are working with is past data — i have no interest in past data. Past data has no correlation to future prices and esp. in this volatile makeket!!
I have no time for analysts. I make my own decisions on every trade. All i want to know is where we go from here. Where will oil be tomorrow, next month, in six months and 5 years from now. Very simple. I trade the futures market — get it — the futures market!!
Concerning manipulation — it’s illegal and wrong.
Do you think a bunch of oil traders get together in a room and discuss prices esp. future prices and how they can manipulate it. Forget it!! It just does not happen. In over 25 years plus that i have traded the oil markets i have never been invited nor gone nor will ever go to these meetings. Thats called collusion and it’s illegal. Plain and simple. It just does not happen. Trust me.
If the market is trading at a cetain level that means there are willing buyers and willing sellers to transact business there, plain and simple. Thats the market plain and simple. I do not care where you think the market should trade. The market is the market!! Trust me!!
Also you say that you know the oil markets but you have never done a trade, ran a position, traded a future, bot or sold a option, traded derivatives, traded long dated oil — but you are an expert in this field. To that i say “BS”. Pesenting data is one thing but trading the international oil markets is another thing — again trust me.
Also another thing. You talk about manipulation in the oil markets, the oil markets on a daily, hourly and minute timing are way to big to be manipulated. They are just to big, liquid and plenty of players to take you out if you try such a thing. Again trust me!!
Gotta go….late for dinner….sorry if i misspelled a word or bad grammar as i typed this in 5 mins while i traded the markets, had 89 yahoo’s, 26 brokers calling in, 36 emails, entered my future trades for the day and did my mark-to-market (ok go to wikipedia) . Honestly i do not even know why i am writing this….i have much better things to do with people/traders who know how the real markets work. I will be back in wichita (God bless Kansas) in second half of november and maybe i can buy you a beer!!
Oh ya….one more thing….i bet if by chance your father left you with a 100/bbl a day oil well in kansas your thought process would be different concerning this conversation. I am sure you would rather oil be at $100/bbl versus $25/bbl….think about it….TRUST ME!!!
Gary B Bauer Singapore
Bill – is there any way your IT guys can squelch the garbage ‘posts’?
I’d like to thank Gary and rickofcas for their fascinating discussion. Fantastic posts!
My favorite line “if you do not beleive in the basic principles of economics of supply and demand then i am just wasting my time here”.
A spot on comment.
Excellent posts. I want to hear more. From Gary and Ric.
Interesting post, Gary. I’d like to read your comments about the impact of deregulation on the markets, with an eye toward any refutation you can extend to the dozens of economists, traders, etc. who contend that the price of oil has been artificially manipulated.
In the meantime, I remain convinced that the American public has been and continues to be victimized by profiteering in the energy commodities markets.
And one more comment: I do, in fact, hold interest in oil and gas producing wells, and no, I don’t think of the price of oil purely through the prism of my own financial situation. I find absolutely nothing noble about what has been documented in the energy commodities markets over the past five years.
more coming this weekend.
Gary B Bauer Singapore
Gary, 95% wrong, really?
Are you disputing the Richard Arens oil trading scandal?
Are you disputing the charge and conviction of BP’s manipulation?
Are you disputing that Nigerian rebels cannot influence you to influence future bbl cost?
I’m not understanding your generalized comment that %95 of my ideas in my previous post are wrong. Please enlighten me as to where this is coming from.
It’s funny you reference WSU Econ 101 and 102. Are you even aware that the researchers at MIT couldn’t find a correlation between the supply and demand in the oil market, it’s called MIT CEEPR Speculation Study. In your position I am shocked you aren’t familiar with it.
Even the US DoE ( that’s Department of Energy) statistics show that if the markets had been working properly, the price of oil should have been going down, not up, so no thanks, I’ll pass on that WSU scam.
BTW- Sitting up here in the Bakken for the past 8 months and seeing production numbers increase as they are, the last thing I would invest in is peak-oil or some other fear mongering tactic to increase the price. I don’t know what you’re speculating a bbl to go for today but its actual value is 30 bucks.
I might take you up on that beer though this past cold front brought some cold weather I’m sure, I mean guessing, the barely fields were affected so I might speculate the futures of barely to skyrocket and sell accordingly…yeah, that beer with be $8.75 please.
Actually, the MIT study is a fascinating read that, quite frankly, makes any claim that “the market is the market” really quite specious, in my view.
Here’s a link, for those who are interested:
http://web.mit.edu/ceepr/www/publications/workingpapers/2009-013.pdf
Nothing wrong with a good defense of the status quo, though, even though it makes this hard to type with one hand on my wallet. Reminds me a little bit of the health insurance companies.
Remember Bill, MIT is one of those “liberal” east coast Universities.
I’m sitting back waiting for that one next, Ben, since the issue of “free markets,” ridiculous though the concept is, tends to be politicized.
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Bill – just to clarify my own ’slap’ at MIT – I am allowed to do that. I am an alum.
Another issue – can your IT guys do something to block the garbage ‘posts’ like the two immediately above? They clutter up the site.
Ricofcas — Ric Ric Ric. Here we go again —-
Richard Arens trading scandal. A scandal — give me a break. The man buys 1-10 lots (1,000 to 10,000 bbls) so he could get hit at over $100/bbl. Big deal. It had no market ramifications what so ever. Who cares. Everyone has the God given right to buy and or sell at any time, any price and any where! The market took him out in a nano second and if i recall right the market traded back down to approx. $97 over the next two days and then eventually back over the $100/bbl level. He took the hit and who cares.
The BP manipulation charge and conviction. They were wrong in doing it and were punished for it. 100% wrong on their part. Just like Enron on west coast utility prices. Wrong, wrong and more wrong. Any types of fraud and or manipulation on anyone’s part to affect the market level of prices is wrong!
Nigerian rebels causing disruptions in the niger delta. Yes Nigerian rebels can cause the price of oil to go and or down. That’s just world politics. Plain and simple. Over the years i have traded plenty of nigerian crude cargos FOB and have had my pnl hurt by these disruptions but that’s just part of the game and or rules of the game. Be a big man and accept it.
It’s the same thing as a winter frost on oranges in florida, a unexpected snow storm in april in new york, a heat wave in california, north korea selling arms to iran, iran shooting of test missiles, china coming out and announcing a 100,000,000/bbls of crude oil for their new strategic stockpile program and or a hurricane in the USGC. These all affect the markets but that’s just life. Be a big man and accept it. If you do not like the rules of the game, then stay out of the market. But do not sit there and whine, cry or b*%$# about it as the price of motor gasoline goes up $.50cts/gallon due to this unexpected event. Go on down the road.
Ric lets just face it — you and i are at the very ends of the spectrum. And that’s fine. I truly believe in free enterprise, competitive markets, entrepreneurial spirit, no one owes me anything, if i lose money it’s my fault, a market free of fraud and manipulation is best, supply and demand does work 100%, i as an american am not entitled to cheap energy prices and the market is the market at all times even when it goes against me or i disagree with it. I think you feel that if something goes wrong in the way life should be in your eyes, what you expect or something goes different from what you read in a report then it is all due to fraud and or manipulation by others. Those damn traders!!! I do not feel that way at all.
I think the price of gasoline should be approx. $4.00/gallon so we as a nation conserve more fuel and to give the majors and other independent refiners/drillers incentive to go out and explore for additional oil (that’s approx $70/bbl minimum) and to build new and improved refineries. I am not entitled to cheap motor gasoline as most americans think. Exxon and Chevron do not have an obligation to produce motor gasoline but will only when there is an economic incentive to do so. That’s called profit. A very bad word for liberals. I am not guaranteed every time i go down to the corner gas station that there will be gasoline there and at cheap prices. It will only be there if there is an economic incentive for it to be there and i am willing to pay a higher price for that satisfaction.
Yes most americans do feel that the price of motor gasoline is way too high and feel frustrated as they are being forced to pay higher prices for their hydrocarbon demands. The only problem is that there are other countries around the world that do not have a problem paying up for crude oil as their countries develop. China, India, Brazil and other developing countries have very heavy thirst for energy and are willing to pay for it. This just pisses off most americans as they are frustrated because there is nothing they can do about it. They think they are entitled to cheap oil but now there are other gorillas in the market willing to pay higher prices . And they have the right to this oil just like we do. More demand means higher price!!! Plain and simple!!! I know the economic principle of supple and demand scares some, but trust me it does work and it’s very efficient. I trade oil daily with China and India and have traveled there 20-30 times each over the years and their demand for oil is growing and growing. Trust me on this. It is not just a made up line. I get calls daily from their traders asking what types of crude oil and or refined products i have for sale constantly. This demand is not going away nor the price of crude oil going down substantially. Bottom line — cheap gasoline is over bubba!! Scratch that from your game plan of life.
Few more things. I could care less what MIT says on the correlation of supply and demand. And yes i have read it. And yes they also did mention the fact that they found no manipulation in the run up of energy prices but i am sure you quickly glanced over that part as it did not fit into your neat and orderly game plan of life. Who cares!! I know supply and demand does work, i respect it and i trade off of it. I just want to know or try to discover where prices are going in tens minutes, one hour, next week, next month and you guessed it, next year!!! Also i could give a damn what the DOE says concerning where the price of oil should be!! The DOE said down and that fits perfectly into your game plan of life but when prices went up you went ballistic and cried “FRAUD” and “MANIPULATION” and it’s all those damn “SPECULATORS” fault. Man give me a break. I am so so tired of hearing this.
I do believe in peak oil. Oil is a wasting asset. One day there will be no more oil. You asked me what i speculate what a price of oil to be as you say its actual value should be $30/bbl. I say the true value of a bbl of WTI for november is approx. $69-$70/bbl. That’s where the market closed on friday so that is the true value of oil in my mind. If you think the value of WTI crude oil is $30/bbl i will take all the bbls you have to give.
One more thing please. Very experienced oil traders only make trading profits approx 60-70% of the time on trading positions and that might be pushing it. That means they lose approx. 30-40% of the time. Trust me on this. If i was manipulating the market why would i manipulate to lose or to lose on any one trade. Ever!!! Makes no sense to me. When i do lose on a position or take a big hit i do not whine, cry, go ballistic or put myself in timeout. I accept it, say the market was smarter than me this time, try to learn from it and go on down the road. I do not blame others, yell fraud, scream manipulation or get mad that the trade did not go according to my designed game plan.
This is taking up way to much of my time on this beautiful sunday morning in Singapore. I wanted to respond to a few things. I am still on for the beer in november. You said that with the cold front and the prices for barley maybe going up by gready traders that the beer will now cost $8.75. FYI a corona beer in Singapore goes for Sing$14.00 and that’s equivalent to approx US$10.00 per bottle……..per bottle!!…….but i am not complaining nor stopped drinking…..i just accept it, that’s the market and order another and then another!! Oh trust me, the more i drink the smarter on oil i become!!
P.S. I should reread this and check spelling/gramar……no way…..to impatient…..gotta go…..the markets are moving!!
Gary B Bauer…….Sinagpore…….GO CATS!!!!
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Since i am on this rant, i will have more to add soon. I am off to Seoul, Korea tomorrow for meetings/social visits with their four major refiners and then to Jakarta, Indonesia to meet with Pertamina, the national oil company of Indonesia later in the week. My determinations of the oil market trading place comes from my actual experiences from dealing and trading with real and true oil players.
Gary B Bauer……..Singapore……..go cats!!!
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T. Boone Pickens said Tuesday he has increased his long oil and natural gas position in recent weeks. Pickens added that oil prices could spike as high as $100 a barrel next year if there is a rebound in the global economy.
Oop’s thats not in Ric’s game of life forecast!!
Here comes FRAUD and MANIPULATION and those darn SPECULATORS!!!!!
Gary B Bauer……Singapore……go cats!!!