"CRUDE" oil, an absolute must see program !!!

[Meanz Beanz]

Originally Posted by the1much

hurry up and look before he sees,,,i gotta get it back down ta "normal" size,,hehe

I can hear mum and she is saying....Your a very naughty boy Jim...!

[Meanz Beanz]

Thanks for the links Brian!

We challenged 140 last night and broke the "bullish flag" price pattern to the upside, I want to see more follow through but I think that this is the break that will take us to the 160 area. No doubt it will be nervous trading this Friday and we should set a positive direction next week.

Man filling the tank is getting painful and I have the benefit of a strong currency. This must be killing folk with big cars in your neck of the woods.

Cheers
MBz

[Meanz Beanz]

The thing with that 35mpg gallon target is 1. its low and 2. its redundant. The most powerful signal that people respond to is price, at this rate they are going to demand amazing mileage to fork over for a new car, certainly better than 35mpg, both my cars currently run in that range. In a market economy price sets these targets not government action, this is the market sorting itself out, less than idea but its the best system man has come up with so far.

[Frosty]

As my question seems to be misunderstood I will lower it even simpler to a level that might get my point over.
When some one buys shares the computer finds a buyer and and a seller and meets them up!!! sold--- the computer then sorts out the market price,--ads a bit or takes away a bit.

If all this forum went to buy oil the price would go up accordingly.

later in the day Virgin airways needs some future security and buys oil.

We sell our oil that day because Virgin bumped it up to an acceptable level for us all to make a profit. Virgin then has expensive oil. Why because the forum guys speculated in the price. If we hadnt have been there or been allowed to mess with such an important comodity the Virgins seat price might have been a little less next year.

We didnt need it we just wanted to make money.

Take this situation and multiply it many times. That would be possible to gradually raise prices artificially.

Now im not an expert at it as I have said , if im wrong about the workings of the stock market and my theory, then Im sure I am about find out about it.

[DanishBagger]

Originally Posted by Meanz Beanz

OK take it the wrong way then... ! You define a speculator, I have never met anyone who can to sufficiently identify them in the context of a market. Why is a speculator different from an investor, what is the difference? Substitute the word investor for speculator in alot of the arguments against speculators and they start to sound silly. So who draws what line where and why? Its very easy to get lost in a world of definitions once you start ruling in this area, why that should offend you god only knows. This is where the real spin and politics is.

It doesn't matter what we call it, although it seems a stretch calling people trading with oil futures and what not "investors". Anyway, it doesn't matter, what we call them. The fact of the matter is that the oil changes hand many, many times, and yes, the middlemen do calculate (but we can't really call them "calculators", can we now?) risk to get their take on the market.
You're the one having a problem with me stating that all those middlemen "speculated" on which way the price would go. You're the one, denying that all those middlemen means the price in the end will be higher because they all want their take. Yes, it's a supply-demand thing, but even though the supply would be the same, it's not nonsensical to think that without all those middlemen, the price wouldn't be as high. And no matter how much you wrap it in words and split hairs and try to make this about terminology, the many middlemen getting their cut will not change.
I'm not willing to discuss whether we should call the middlemen "investors" or "speculators" as that has no bearing on the view I reported the danish "oil king" (he's called that in danish) expressed. Call it wht you want.

Oil is one of the most efficiently, tightly priced things on this planet. The "middle men" make stuff all on huge investments. Caltex, one of our major refiners, made 1c per litre of fuel supplied last year. Big oil runs on about 9% profit, basically sweet F/A for the size and duration of the investment.

I don't consider a refinery a "middleman", but a production facility.

You are confusing trading with supply chain middle men and marking up.

I'm not confusing anything. Don't make use of strawman argumentation - I never purported that we as consumers should be able to get it direct from Saudi arabia by simply opening a tab.
A.P. Møller-Mærsk (freight) aren't a middleman either. They ship the damn oil.

They are not the same, as many of these guys lose money on any given trade than make it. You are seeing hedge strategies at work in this market, among other things, their goal is often simply to fix an input cost so that a business can price a product correctly for a given period. Profit or none is not a factor, its about risk management. That goes on the supply side equally, if a small oil company can fix a profitable price for expected future production they will hedge some or all of that depending on their costs. The higher the cost of operation the more likely they will forward sell. Then come delivery time if they have not got enough they will buy back. This is not "middle men" markup activity, its part of an efficient capital market that allows producers and consumers to manage risk.

As I said: No matter how convoluted you make it and split hairs over terminology, it won't change the reality that a lot of middleman, not having anything to do with the actual supply chain make money off of oil. They just push papers around amongst themselves.
For further on that, see above.

Rhetoric and politics? I suggest you go and read the posts relating to the long standing discourse that Charlie and I have had over the effect of speculators in the oil market before you insult me.

Well, it was. You're opposing the mere notion that someone could "speculate" in the oil market even though many people actually do that (just as people do when daytrading stocks).
And your effort to push this over into something about not using the correct terminology and making it a question of being an idjit for not getting the whole "it's not speculation, it's investing. Futures aren't speculation", that is pure rhetorics and politics (in the context of this discussion, that is).

Thats what Frosty first hooked in on and that was the context my reply was set it. Frosty's restatement of the issue changes the discussion completely and moves away from the original contention that speculators are a big factor in the high price of oil today. Actually Frostys statement is in line with reality but it differs from the original contention and thats the point that I felt needed to be made. Given the history of the discussion the implication was that the effect was a negative one, while thats not what he actually said.

But the thing is, you didn't respond to Frosty. You quoted me, and responded to me. I can only see that as a response to what I posted.

3300 mb a day traded is a big number? If its accurate I'd have expected the Nymex to have a bigger slice of it... thats what I was pointing out.

I know by international standards Haarh (that's the dude's name) isn't huge. But he has made billions in the oil market (by way of petrol stations), has dealt oil daily almost his entire adult life and is now 70. I'm pretty confident he's not pulling these numbers out his rear.

The open interest (existing contracts) in the Nymex light sweet contract, which is the number of more importance than contracts turn over, was less than 1300 mb across all months out to 2016, thats against a monthly physical draw down of 1750 mb. Again it does not seem excessive.

Again, I point you to my remark about burying it deep down.

Oh but it often does, a futures contract will often have more open interest at points than product can be supplied but that is only a bad thing under certain circumstances. Commodities law recognises those circumstances and seeks to prevent them because they can be manipulative if market concentration is high enough, this is something that is very very difficult to achieve in a large market like oil. The "Enron loop hole" circumvents these laws and this is what the discussion is in the US and where this topic came from. They are talking about why, how and if those trading in this fashion should be legislated out of the market. One of the ironies here is the group being called speculators are in fact index funds, they are long term buy and hold funds that in any other market are called investors. It seems if we benefit from it your an investor, if we perceive we don't (we do, but that is another discussion) your a demon speculator.

Very interesting by itself (no, I'm not being sarcastic). I do notice, though, that you use the term "demon speculator". By extension you shouldn't have a problem with the term "speculator" as an all but reasonable description of some people/funds/investment banks in any given industry.

Anyway as I have pointed out before if they close this loop hole in an agressive fashion it will have a short term effect and a long term effect. Better prices in the short term and higher in the long term for one of two reasons... being; lower/delayed investment in the sector OR captial flight to other markets... both of these are bad for the US, hence the legislators need to consider their moves carefully. Being an election year I suspect that a short sighted and damaging populist move will be made, but I live in hope that they will not shoot the goose that lays the golden egg as they have done in the past (windfall profits tax!).

Again, very interesting (still not being sarcastic), but again, none of that counter what has been said about the middlemen.

The paper barrels we need to worry about are the reserve barrels that magically appeared on the formation of OPEC's quota policy. They appeared virtually over night and have been maintained at false levels purely for political reasons relating to the quota policy within OPEC. Basically they are a lie, a big lie.... to the point we are not sure how much of the worlds most critical resource is left and its in none of the players interest to be truthful about it.

Hmm.

Its a mad situation that if in a work of fiction you'd dismiss as not credible.

The only thing I dismiss is the claim that there aren't any middlemen each adding a little to the price of oil. Especially in a market where the supply cannot follow the demand.

Peak production occurred in 2005 and stands until surpassed which is very unlikely. To get why that is an issue you need to get your head into the "dynamics of resource depletion". Long story short, peak production occurs at somewhere around 50% reserve depletion and that occurs around the 90% point in the time line to total depletion due to the exponential nature of demand growth (just look at India and Chinas growth rates!). We have distorted that with modern and more efficient extraction methods but that just makes the drop off faster when it comes. We also don't get to use the last drop of oil, prices will sky rocket toward the end of this cycle i.e. alternates are needed now. We have almost reached the end of cheap oil, your world as you know it, runs on cheap energy. We need to replace it with other cheap sources and quickly. High oil prices are the path to getting the investment interest in the right areas to solve this issue, that is a critical part of the solution. Logistically we are almost certainly to late now to avoid a major energy crisis, it takes more time than we have to put in place cheap alternates even if we had them and started tomorrow. So it seems we are in for a period on high energy cost until we rearrange ourselves to use other sources.... managment by crisis seems to be a part of the human condition.

Again, that has little to do with the notion that middlemen drives the prices even higher than it would do without them. As I stated earlier, neither me, nor he, is claiming that the minus on the supply-demand balance is caused by these middlemen. That seems to be your idea (that we think that), and you seemed to imply that when you responded to me in the first post as well.

To repeat we are 1.5mb per day short at the moment, when that is resolved pressure will ease on the price.

Finally. The thing is, one thing doesn't rule out the other. Just because we have a higher demand than supply doesn't mean speculators/investors (call them what you want) aren't a big part in driving the prices upwards. It's even easier to do that when the demand is high. It's not a either/or, but a both/and.

That will occur but given all the other factors at play here it will very likely be short lived. This is not a time to scape goat the energy industry or anyone willing to invest in the sector by whatever means, this is a time to put capital in their hands to solve this issue.

Yes, buy some more danish windmills

Here is a poser for you... If these guys have the ability to drive prices higher at will and all the middle men can just mark up as they wish...

Sorry, but you're making yet another strawman.
I never (nor did he) claim or inferred that they're able to drive anything up "at will", nor that they could mark it up "as they wish". I'm talking about having the oil changing hands so many times in a market where the demand is much higher than the supply making for ideal conditions for speculating middlemen.

then what the heck where they doing taking USD $10 a barrel not so long ago?

See above.

Commodity producers are price takers, not price makers... they have no pricing power , they are completely at the mercy of the market.

See above.

[Frosty]

Errrr the oil minister of Saudi Arabia has said many times that the price of oil is due to speculators raising the prices .

Now I don't know if he is correct or not,-- but I think as Saudi Arabia's minister for oil he would know a bit about the job? Im certainly not going to disagree with him.

[Petros]

The Arabs are just trying to deflect the blame. You can not stop speculators.

The truth is that speculators actually help reduce market price fluctuations. If they think the price will rise because of a rise in actual demand will occur (or a slow down in supply), they buy future delivery contracts, causing the current price to rise somewhat. If the shortage actually occurs and the price rises, they will rush to sell the contracts at peak demand. This makes more deliveries available than otherwise would be, so the price is actually lower than the actual market conditions would cause. Of course if the price does not rise, their delivery contracts expire worthless (because the current market price is actually lower than the contracts they hold). They lose big time, not the consumers.

So they smooth out wild fluctuations in prices, causing it to be higher during less demand periods, and lower at peak demand periods.

Consider if the market was priced by actual supply and demand needs: the price stays way low during times of surplus, but suddenly spikes when there is a supply interruption or increase in demand. This would not be good for anyone that depends on it.

The real problem is that if there are only a few suppliers, than it is not in their interest to increase the supply. It will drive prices down, which means their reserves will be less valuable (the oil reserves are like money in the bank).

That is why it is important to make sure there are lots of different competing source of supply, which unfortunately is mostly a function of government policy. Any one oil producing government (including the USA) could drive the price down by increasing the supply, even just a little bit. To stop the speculators, you simply increase the supply.

Of course the price would be about a third lower if the US congress had not devalued the US dollar by raising the government debt ceiling. US prices would be more like $2.50/gal for gas (vs. todays $4.20) if the USD was valued the same as it was just two years ago.

I guess we get the stupid government we deserve by electing so many big spenders. Keep in mind it is the Congress that authorizes spending (and intern the value of the dollar), and authorizes new oil wells. They are in direct control of both, so the blame rests squarely with the current congress.

[Meanz Beanz]

Originally Posted by Frosty

If all this forum went to buy oil the price would go up accordingly.

Thats not correct. You're thinking in terms of fixed supply, the futures market will generate a much paper as you want to buy if it believes that it can deliver at that or a lower price. All we'd do is expand the open interest then come settlement time it would all be resolved in physical product and cash. Those that don't want the oil there and then or don't have the oil close out contracts and evaporate around settlement. If we all go a buy oil and take it of the market and cart it home then depending on the availability we might push the price up. If we are taking it away and storing enough of it, but can you call that speculation? Thats more like hording, the people being targeted here as speculators are not hoarders.

[Meanz Beanz]

OK DB, I tried to explain but I have got nowhere, you clearly don't understand how a futures market operates and I am obviously incapable of explaining to you. This "middle man" concept is just rubbish, you seem have a long only mindset that completely disregards the main function of the futures market.

I didn't deny the existence of speculators (or whatever, you can't define them can you?), you have not understood my my posts if you took that message away. I am saying that they don't have the ability to divorce the price substantially from the reality of supply and demand as is the core of this discussion (that started before you joined in) and as accused by the US congress.

There are no strawmen in that argument... I wish you try and understand as much as you like to attack.

The conditions you describe are a nightmare for speculators, they thrive where markets oscillate either side of the real supply and demand situation. Speculators exist to exploit discrepancies where the market has divorced itself from reality, they are like vigilantes looking for and punishing any mistake. Just try trading futures... its a shark pit, you will be handed your head in short order if you make a false move. Also the fact is quicker profits are had on the short side driving price down when its over done. The relentless bull nature of this market has hung so many speculators out to dry its not funny, they are bleating about it on Wall street which is why its getting air play in congress.

By the way if we are relying on third parties to make our cases T. Boon Pickens agrees with me.... so? Google him if you want.

I did respond to Frosty and you made reference to it, so I responded to that....so?

Frosty the Arabs have a great interest in diffusing the truth for a great number of reasons. They are playing a political game as much as the US is by hunting speculators.

[Meanz Beanz]

Originally Posted by DanishBagger

Sorry, but you're making yet another strawman.

I never (nor did he) claim or inferred that they're able to drive anything up "at will", nor that they could mark it up "as they wish". I'm talking about having the oil changing hands so many times in a market where the demand is much higher than the supply making for ideal conditions for speculating middlemen.

That point was valid in the context of the broader argument that has been conducted here. If you can't see that well words fail me...

[Meanz Beanz]

DB perhaps you'd would like to explain just how you think these middle men drive the price up in a two sided futures market with unlimited supply of paper on which to write contracts. Tell me exactly how you think it works, maybe in the process you will discover the flaw in the logic.

[DanishBagger]

Originally Posted by Meanz Beanz

OK DB, I tried to explain but I have got nowhere, you clearly don't understand how a futures market operates and I am obviously incapable of explaining to you. This "middle man" concept is just rubbish, you seem have a long only mindset that completly disregards the main function of the futures market.

Ah, yes, people dealing by merely pushing papers around certainly doesn't mean they're speculators, and as such can be considered middlemen.
As I already stated in my second post in this thread, I find it offensive you're trying to make this a matter of terminology used. It doesn't matter if I was absolutely clueless to "how" the futures market works, because that does not in way remove the reality that we have people (and funds etc), playing the horses without actually contributing anything, except to make a buck on the odds.
Look, let me simplify what I'm saying: People not producing/refining/or, say, delivering the actual product, with nothing more to do in the oil market than to make a quick buck, are all middlemen, and (here comes the political message): are all PART of driving the price upwards.

Another comparison could be the ordinary stock market: The buyers and sellers, especially the daytraders, are buying and selling to make a quick buck, and this market is also influenced by rumours and especially expectations. These expectations can easily drive the market upwards. Even to unreal heights. Last time that happened for real was the dot-com bubble.

I didn't deny the existence of speculators, you have not understood my my posts if you took that message away, just the ability of the "speculators" to divorce the price substantially from the reality of supply and demand as is the core of this discussion that start before you joined in.

I'm well aware that you try to divorce the speculators from the demand/supply equation, but I have already stated why it's a both/and, not a neither/nor.
In your first post to me, you decided to try and argue that because "noone" could give a precise definition of "speculator", no speculation took place. That to me is trying to deny the excistance of speculators. Especially when you try to make the point, that they should be considered "investors".

There are no strawmen in that argument... I wish you try and understand as much as you like to attack.

I don't attack, I argue my case - don't worry.
There is indeed a strawman in that argument. When someone pretends the opponent is saying something other than what the opponent is actually saying, attack ("disprove") said imaginary position (of the opponent), and then go on to conclude (or infer in this case) that the opponent is wrong, is not only a strawman, but even a classic example.

The conditions you describe are a nightmare for speculators, they thrive where markets oscillate either side of the real supply and demand situation.

Either side? The supply has long been smaller than the demand, but not until recently have it escalated like it seems to be at the moment. Hell, I seem to remember someone on these boards (can't remember who it was, r even if it truly was here) even saying, that one couldn't lose money on oil futures. He did that about six months ago. I'm willing to bet that he propably made a lot of money so far.
I'm not saying that some random bloke is right, just because he said so, but that notion says a lot about some speculators expectiations towards the oil market. Expectations like that amongst speculators are PART of driving the price up. Get in early, sell when the prices are higher (ad nauseum).

Quicker profits are normally had on the short side driving price down when its over done. The relentless nature of this market has hung so many speculators out to dry its not funny, they are bleating about it on wall street which is why its getting air play in congress.

Well, I don't know how much air play it has gotten in your congress, as I'm across the atlantic from you.
However, I dare say, that even though some people burnt their fingers, does in no way disprove that speculation is part of the huge hikes in prices.

By the way if we are relying on third parties to make our cases T. Boon Pickens agrees with me.... so? Google him if you want.

Speaking of logical fallacies.
I'm sorry, but not all my sources are english speakers, not everything I read is published in an american newspaper.

But, if you insist, here's something from the 24th of June, printed in financial times:
http://www.ft.com/cms/s/0/9e3bd490-4...0779fd2ac.html

Data released on Monday by the House committee showed that the proportion of speculators buying certain contracts of crude oil on the New York Mercantile Exchange grew from 37 per cent in 2000 to 71 per cent this year.

The number of contracts held by swap dealers to buy benchmark oil futures on the Nymex has climbed to 31 per cent, from 10 per cent in 2000.

http://www.npr.org/templates/story/s...oryId=91831967

Morning Edition, June 24, 2008 · Industry analysts say if not for speculators, oil prices would be half of what they are today. Congress is looking into what roles speculators may have played in rising gas prices. The House Energy Subcommittee on Oversight and Investigation heard from regulators, market chiefs and analysts Monday — but speculators were missing from the hearing.

http://www.businessweek.com/bwdaily/...116_499932.htm

Yet these explanations around supply and demand aren't the whole story. That's because another class of player has been wielding more influence on prices of late: speculators. Hedge funds, investment banks, mutual funds, and other financial institutions are magnifying small movements in prices—first as prices moved up last year, and now as they move back down.
[…]
There's been a huge jump in speculation in oil markets, and it's exacerbating price volatility," says Peter Fusaro, founder of the Energy Hedge Fund Center, an energy-trading information site that tracks hedge funds. "The plus side is that there's a lot more liquidity. The downside is that the swings are larger than ever before."
[…]
In a December report, analyst Doug Leggate of Citigroup (C) highlighted the growing influence of financial firms. He wrote that "rising fund interest" has emerged as the "dominant long-term driver of price."

Well, I hope you don't consider them "random" sources.

Frosty the Arabs have a great interest in diffusing the truth for a great number of reasons. They are playing a political game as much as the US is by hunting speculators.

This I actually agree on. The Arabs might be right, but the reality is, what else would they say? They have a vested interest in putting blame elsewhere, and as such a statement like that cannot be taken at face value.

[DanishBagger]

Originally Posted by Meanz Beanz

That point was valid in the context of the broader argument that has been conducted here. If you can't see that well words fail me...

Valid in the broader context? So you find something someone else have said, and pretend that everyone is saying that, which is easily disproved? That's still a strawman.
But anyway, I see your point: You just respond to me, but in reality you're not even talking to me, nor are you countering my claims/arguments with what you write? Even if you do what I do: take one paragraph/claim/argument at the time?

Speaking of words failing …

Originally Posted by Meanz Beanz

DB perhaps you'd would like to explain just how you think these middle men drive the price up in a two sided futures market with unlimited supply of paper on which to write contracts. Tell me exactly how you think it works, maybe in the process you will discover the flaw in the logic.

see the links I posted from american news outlets before you dismiss what I claim as pure hearsay and pocket theories, making such demands that unless I can explain detailed about this, I cannot possibly be right or even have a point.

Edit: I'm off to bed. I came home from work just before I ended up here again. Sleep tight all of you, and no hard feelings - it's just a discussion Looking forward to continue this later.

[Frosty]

I only read short posts! Like this one. I must have attention span deficiency ---------Yawn

[Meanz Beanz]

Your right, its all boring and deleted...