I will believe the Saudis don't see any upcoming problems with Ghawar when they cancel one of their projects due to low oil prices. If they continue to be full steam ahead with increasing their capacity then I think they are aware that Ghawar may not be as robust in 5 years time as they would like us to believe.
Joined: Mar 04, 2005 Posts: 2729 Location: New Zealand
Posted: Sat Jun 28, 2008 9:22 pm Post subject: No evidence of manipulation in oil trading
No evidence of manipulation in oil trading
Quote:
Several years ago, he continued, he began to notice that increasing cash flows were moving into commodities index funds. This was, he said, "long-only money" — meaning that it was a pure bet that prices would go up. By now, he told me, there is $240 billion in commodity index funds, up from $13 billon five years ago. As he also noted in his testimony before Congress, "The prices of the 25 commodities that compose these indices have risen by an average of 183 percent in those five years!" He claims that energy prices will fall by 50 percent if the speculators can only be driven out of the futures market.
There are so many holes in this argument that I scarcely know where to start. The CFTC says that some $5 trillion worth of futures and options transactions trades take place every day; can an influx of $240 billion, spread over five years, really propel prices upward to the extent that he and others claim?
Then there's the fact that the commodities markets don't work like equity markets, where a small amount of trading can lift every share of a company's stock. In commodities trading, every contract has a buyer and a seller, meaning that for every bet that prices are going up, somebody else is betting they are going down. Why doesn't that short interest depress prices?
And what about all those commodities, like coal or barley or sulfur, that don't trade on any futures market but have risen as fast or faster than oil?
Or how about the recent decline in cash flows into many commodity funds — why have prices kept going up if the money has stopped pouring into those funds?
My speculator friends tell me that in the last two weeks, trading volumes have been cut in half. Indeed, what I hear is that much of the speculative money that remains in the market is betting against higher oil prices.
Both speculators and oilmen say that supply and demand is the real culprit. "Our supply is pathetic," said Gary Ross, the chief executive of the PIRA Energy Group, and a well-known energy consultant. "Look at the data," he continued. "The world economy is growing by 3.9 percent a year. World oil demand should grow by 2.3 percent just to keep pace. That's an extra 2 million barrels a day. We don't have it! It's obvious."
IHT _________________ Human history becomes more and more a race between education and catastrophe. H. G. Wells.
Fatih Birol's motto: leave oil before it leaves us.
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