As Oil Sinks, U.S. Officials Plan to Fight Speculation - GoFuckYourself.com

Barefootsies · 12-21-2008, 10:28 PM

NEW YORK -- A financial crisis and recession this year have pulled off what U.S. lawmakers couldn't: popping what many believe was a speculative bubble in oil prices.

But a collapse from highs above $145 a barrel into the $30 range doesn't mean Congress is washing its hands of the issue. Instead, many lawmakers are emboldened, seeing both the crude-price collapse and the systemic failure of the credit-derivatives market as reason to push ahead with rules to prevent what they call "excessive speculation" in commodity markets.

"The anti-speculation talk may have subsided in the market slide, but its ugly head is likely to rise again," said Greg Mocek, a former head of enforcement at the Commodity Futures Trading Commission, now a partner at law firm McDermott Will & Emery in Washington.

Light, sweet crude oil for January delivery on Friday fell $2.35 a barrel, or 6.5%, to $33.87 on the New York Mercantile Exchange. The new benchmark contract, which ended higher on Friday, is poised to begin trading above $40.

President-elect Barack Obama vowed Thursday to impose more stringent regulation of financial, stock and commodity markets. In his nomination of Gary Gensler as CFTC chairman, Mr. Obama charged his appointee with "regulating some of the unsound practices and excessive leverage that helped cause this crisis."

A consensus has emerged that at least part of the reason for oil's plunge stems from unprecedented financial-market strains that forced speculative investors to dump assets and raise cash. Speculators include funds, banks and other financial institutions trading to gain from price movements, rather than hedge against them for commercial reasons.

With the Enron energy-market fraud still in recent memory, many lawmakers cried foul as prices skyrocketed. The CFTC has since found little evidence of intentional market manipulation or trading strategies meant to artificially sway prices.

Many market watchers say there isn't enough transparency in darker recesses of the markets for the agency to make such assertions. They argue that speculation unfettered by strong oversight may have unintentionally sent prices to levels divorced from demand and supply factors, doing exactly what the CFTC was created to guard against.

"It's incredibly important that we understand the causes of the bubble and make sure that we return the market to transparency so we don't have this happen again," said Sen. Maria Cantwell (D., Wash.), one of the lawmakers leading the charge for stricter regulation.

Washington appears poised to forge ahead with new commodity-trading rules. There are already 30-plus proposals for greater commodity regulation, and lawmakers in both chambers are writing legislation that would at the very least give regulators authority to set position limits in over-the-counter markets.

"Even if speculators only had a small impact [on price], that's not right. Our job is to guard against fraud and abuse," said CFTC Commissioner Bart Chilton, a Democratic appointee. "Congress should act expeditiously to prevent the type of excessive speculation and leveraging we have seen."

Oil markets bore undeniably bullish features in the first half of the year. World demand was rising, unrest continued to afflict big producers such as Nigeria, and new sources of crude were proving big disappointments, stoking fears that demand would continue to outpace supply.

Oil, already on a tear for much of the decade, soared in response. After starting 2008 by hitting $100 a barrel for the first time, crude prices continually set record highs.

Most market participants say some speculation is healthy and even necessary to provide liquidity. But in the past two years, oil prices more than doubled, then fell to less than a third of all-time highs hit in July, fueling demands for regulation that would stabilize consumers' energy bills.

The more oil prices climbed, the more that market veterans searched for reasons to justify moves that brought oil to an intraday high of $147.27 a barrel in July. Critics were quick to blame large banks and hedge funds for causing the price rises.

he fall in prices since July has happened with stunning velocity. While fears of a global recession and a real contraction in oil demand are the principal reasons for the stampede out, some analysts have also seized on a retreat by speculative investors as proof they were behind the rally in the first place. It's hard to believe that more than $100 a barrel's worth of demand has vanished from the world in five months, they say, despite the world-wide slowdown.

Market positioning appears to support this view. Crude-oil futures and options contracts open on the world's two major energy exchanges have declined by nearly a quarter since May, according to a report by LCM Commodities.

If fast money is down, it's not out, with some funds still in the market banking on price declines rather than increases.

"We were very bullish in the first part of the year and subsequently we flipped our view and are quite bearish at the moment," said Dennis Crema, chief executive of BlueGold Capital Management LLP, an oil hedge fund. "We at BlueGold were never in the camp that rampant speculation was causing the market to rally." The $1.1 billion fund returned just under 200% through November, profiting even as crude fell by half.

http://online.wsj.com/article/SB1229...googlenews_wsj

tony286 · 12-21-2008, 10:37 PM

http://www.dailykos.com/storyonly/2008/12/21/15822/284

Redrob · 12-21-2008, 10:42 PM

Kismet!

It is aout goddamn time they do something about the speculation in energy futures.

I still think they need some Congressional hearings about last summers oil prices.

kane · 12-21-2008, 10:52 PM

Not a bad idea. OPEC just met and agreed to cut production by about 2 million barrels a day. That will drive the price of oil back up some. The last thing we need is speculators driving the price back up even higher. The economy is in enough trouble. You kick gas back up to $4-$5 a gallon and things will get even uglier.

Profits of Doom · 12-22-2008, 12:11 AM

Quote:

Originally Posted by kane

Not a bad idea. OPEC just met and agreed to cut production by about 2 million barrels a day. That will drive the price of oil back up some. The last thing we need is speculators driving the price back up even higher. The economy is in enough trouble. You kick gas back up to $4-$5 a gallon and things will get even uglier.

The day of the announcement oil still went down, and most analysts were saying they don't believe OPEC will actually cut production, so I have my doubts as to whether that drives the price up at all...

Barefootsies · 12-22-2008, 12:20 AM

Quote:

Originally Posted by Profits of Doom

The day of the announcement oil still went down, and most analysts were saying they don't believe OPEC will actually cut production, so I have my doubts as to whether that drives the price up at all...

Bush will make a phone call, and tell his cartel to keep the production at current levels.

teomaxxx · 12-22-2008, 06:15 AM

why not to put in the prison guys from Goldman Sachs who were heavily involved in oil spepculation this year? according their reports they made a few billions on oil price bets, while they were pushing 200 oil agenda...

The real and the biggest speculators wont be ever blamed or prosecuted since they are well conected guys, like its the case of Goldman Sachs.

Fletch XXX · 12-22-2008, 06:20 AM

Quote:

Originally Posted by Redrob

Kismet!

It is aout goddamn time they do something about the speculation in energy futures.

you would think they would have learned something with Enron

the most insulting thing is hearing the stock traders cheer on california fires (burning homes and shutting down fuel plants) to drive prices up...

clubchics · 12-22-2008, 06:34 AM

the investors spoke... now the american people are speaking.... take your oil and jam it in your fucking asses

pornguy · 12-22-2008, 08:02 AM

AAA said people were driving less. And I think thats a great thing.

Kudles · 12-22-2008, 04:16 PM

Oh boy here we go

skrinkladoo · 12-22-2008, 04:20 PM

Yes - this is the infamous American way, make allot of money, and then make the method illegal so no one else can do it. In this case, shit ... i agree - stop the maddness!

12-21-2008, 10:28 PM	#1
Barefootsies Choice is an Illusion Industry Role: Join Date: Feb 2005 Location: Land of Obama Posts: 42,635	As Oil Sinks, U.S. Officials Plan to Fight Speculation NEW YORK -- A financial crisis and recession this year have pulled off what U.S. lawmakers couldn't: popping what many believe was a speculative bubble in oil prices. But a collapse from highs above $145 a barrel into the $30 range doesn't mean Congress is washing its hands of the issue. Instead, many lawmakers are emboldened, seeing both the crude-price collapse and the systemic failure of the credit-derivatives market as reason to push ahead with rules to prevent what they call "excessive speculation" in commodity markets. "The anti-speculation talk may have subsided in the market slide, but its ugly head is likely to rise again," said Greg Mocek, a former head of enforcement at the Commodity Futures Trading Commission, now a partner at law firm McDermott Will & Emery in Washington. Light, sweet crude oil for January delivery on Friday fell $2.35 a barrel, or 6.5%, to $33.87 on the New York Mercantile Exchange. The new benchmark contract, which ended higher on Friday, is poised to begin trading above $40. President-elect Barack Obama vowed Thursday to impose more stringent regulation of financial, stock and commodity markets. In his nomination of Gary Gensler as CFTC chairman, Mr. Obama charged his appointee with "regulating some of the unsound practices and excessive leverage that helped cause this crisis." A consensus has emerged that at least part of the reason for oil's plunge stems from unprecedented financial-market strains that forced speculative investors to dump assets and raise cash. Speculators include funds, banks and other financial institutions trading to gain from price movements, rather than hedge against them for commercial reasons. With the Enron energy-market fraud still in recent memory, many lawmakers cried foul as prices skyrocketed. The CFTC has since found little evidence of intentional market manipulation or trading strategies meant to artificially sway prices. Many market watchers say there isn't enough transparency in darker recesses of the markets for the agency to make such assertions. They argue that speculation unfettered by strong oversight may have unintentionally sent prices to levels divorced from demand and supply factors, doing exactly what the CFTC was created to guard against. "It's incredibly important that we understand the causes of the bubble and make sure that we return the market to transparency so we don't have this happen again," said Sen. Maria Cantwell (D., Wash.), one of the lawmakers leading the charge for stricter regulation. Washington appears poised to forge ahead with new commodity-trading rules. There are already 30-plus proposals for greater commodity regulation, and lawmakers in both chambers are writing legislation that would at the very least give regulators authority to set position limits in over-the-counter markets. "Even if speculators only had a small impact [on price], that's not right. Our job is to guard against fraud and abuse," said CFTC Commissioner Bart Chilton, a Democratic appointee. "Congress should act expeditiously to prevent the type of excessive speculation and leveraging we have seen." Oil markets bore undeniably bullish features in the first half of the year. World demand was rising, unrest continued to afflict big producers such as Nigeria, and new sources of crude were proving big disappointments, stoking fears that demand would continue to outpace supply. Oil, already on a tear for much of the decade, soared in response. After starting 2008 by hitting $100 a barrel for the first time, crude prices continually set record highs. Most market participants say some speculation is healthy and even necessary to provide liquidity. But in the past two years, oil prices more than doubled, then fell to less than a third of all-time highs hit in July, fueling demands for regulation that would stabilize consumers' energy bills. The more oil prices climbed, the more that market veterans searched for reasons to justify moves that brought oil to an intraday high of $147.27 a barrel in July. Critics were quick to blame large banks and hedge funds for causing the price rises. he fall in prices since July has happened with stunning velocity. While fears of a global recession and a real contraction in oil demand are the principal reasons for the stampede out, some analysts have also seized on a retreat by speculative investors as proof they were behind the rally in the first place. It's hard to believe that more than $100 a barrel's worth of demand has vanished from the world in five months, they say, despite the world-wide slowdown. Market positioning appears to support this view. Crude-oil futures and options contracts open on the world's two major energy exchanges have declined by nearly a quarter since May, according to a report by LCM Commodities. If fast money is down, it's not out, with some funds still in the market banking on price declines rather than increases. "We were very bullish in the first part of the year and subsequently we flipped our view and are quite bearish at the moment," said Dennis Crema, chief executive of BlueGold Capital Management LLP, an oil hedge fund. "We at BlueGold were never in the camp that rampant speculation was causing the market to rally." The $1.1 billion fund returned just under 200% through November, profiting even as crude fell by half. http://online.wsj.com/article/SB1229...googlenews_wsj __________________ Should You Email Your Members? Link1 \| Link2 \| Link3 Enough Said. "Would you rather live like a king for a year or like a prince forever?"

12-22-2008, 06:34 AM	#9
clubchics Confirmed User Join Date: Jul 2004 Posts: 739	the investors spoke... now the american people are speaking.... take your oil and jam it in your fucking asses __________________ www.BoostUltra.com ICQ ME: 55112653 AIM: CAZEY43 EMAIL: [email protected]

12-22-2008, 08:02 AM	#10
pornguy Too lazy to set a custom title Industry Role: Join Date: Mar 2003 Location: Homeless Posts: 62,911	AAA said people were driving less. And I think thats a great thing. __________________ PornGuy skype me pornguy_epic AmateurDough The Hottes Shemales online! TChicks.com \| Angeles Cid \| Mariana Cordoba \| MAILERS WELCOME!

12-22-2008, 04:16 PM	#11
Kudles Confirmed User Join Date: Feb 2003 Location: Here There and Everywhere Posts: 5,477	Oh boy here we go __________________ Free to Play MMOs and MMORPGs

12-22-2008, 04:20 PM	#12
skrinkladoo Confirmed User Join Date: Oct 2007 Location: South Florida - "Fuck Bitches and Fight Crime - It's all we do! Posts: 629	Yes - this is the infamous American way, make allot of money, and then make the method illegal so no one else can do it. In this case, shit ... i agree - stop the maddness! __________________ * Andrew Love * Services: (1) Web Design, (2) Graphic Design, (3) E-commerce, (4) Database Development, (5) Web Analytics, (6) Targeted Lead Generation, (7) Marketing and Consulting Mainstream: Successful Website Landing Page Design \| ICQ: 360-83-9627

12-21-2008, 10:37 PM	#2
tony286 lurker Industry Role: Join Date: Aug 2002 Location: atlanta Posts: 57,021	http://www.dailykos.com/storyonly/2008/12/21/15822/284

12-21-2008, 10:42 PM	#3
Redrob Confirmed User Industry Role: Join Date: Oct 2004 Location: In a refrigerator box by the tracks. Posts: 4,790	Kismet! It is aout goddamn time they do something about the speculation in energy futures. I still think they need some Congressional hearings about last summers oil prices.

12-21-2008, 10:52 PM	#4
kane Too lazy to set a custom title Join Date: Aug 2001 Location: portland, OR Posts: 20,684	Not a bad idea. OPEC just met and agreed to cut production by about 2 million barrels a day. That will drive the price of oil back up some. The last thing we need is speculators driving the price back up even higher. The economy is in enough trouble. You kick gas back up to $4-$5 a gallon and things will get even uglier.

12-22-2008, 06:15 AM	#7
teomaxxx Confirmed User Join Date: May 2003 Posts: 2,734	why not to put in the prison guys from Goldman Sachs who were heavily involved in oil spepculation this year? according their reports they made a few billions on oil price bets, while they were pushing 200 oil agenda... The real and the biggest speculators wont be ever blamed or prosecuted since they are well conected guys, like its the case of Goldman Sachs.