Posts Tagged ‘crude oil’

Chilton’s evidence?

Friday, April 15th, 2011

During the Futures Industry Association’s annual conference in Boca Raton Fl. in March Commodity Futures Trading Commission commissioner Bart Chilton said that it just wasn’t true that that there was no empirical evidence that speculators in general and more specifically the presence of long-only commodity indexes were at least partially responsible for rising commodity prices.

In numerous Congressional hearings the leadership of CME Group and some industry leaders have consistently pointed out that there were no empirical studies linking high prices with speculation. They also pointed out that the CFTC’s own study in September 2008 seemed to indicate speculators were not the problem. A couple of years ago Chilton had promised a more in depth study from the agency on the matter that would indicate something different, but no such study has come forward.

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Posted in Inflation, Regulatory/actions, Speculators | 1 Comment »

Gold, stocks, oil: Markets in flux

Thursday, July 8th, 2010

Looking for certainty in the direction of financial and commodities markets? Now is probably not the time. That was the overriding theme from today’s webinar on the third quarter market outlook by Darin Newsom, senior analyst at Telvent DTN. “‘Flux’ is the best word to describe these markets,” Newsom said. “These markets can change on a moment’s notice.” For the Dow Jones Industrial Average, Newsom said the long-term trend  remains down while the short-term trend is uncertain. “I’m basically flat this market. It’s difficult to read and I’m getting mixed signals.” (more…)

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Dollar trouble

Wednesday, October 7th, 2009

Gold futures hit an all time record high of $1,045 on Tuesday spurred on by a story in the London based Independent. The story stated that a cabal of Middle East oil producing nations along with China, Russia, Japan and France  where conspiring to replace the dollar as the currency for crude oil.

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Posted in International, Markets | 1 Comment »

Be careful of what you hear

Tuesday, August 5th, 2008

I am often amazed at how market analysts and journalists quickly apply cause and effect in the markets with little or no evidence. We have commented here in the past how dangerous it is to attach two seemingly unrelated events. A market can only go up, down or move sideways so there are usually numerous causes you can credit or blame for a market move.

Case in point is this morning’s rally in equities; the Dow Jones Industrial Average is up about 200 points as of mid-morning. In fact it was up by more than 100 points on the first five-minute bar of the day, which would suggest overnight news moving the market.

The early wire stories attributed the move to a drop in crude oil. However, crude oil was actually rallying in the pre open hours and at the time equity markets were spiking higher.

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Don’t just do something! Stand there!

Wednesday, July 23rd, 2008

A Congressional bill to curtail speculation in the oil market may not come up for a vote this evening because of a partisan disagreement over the number of amendments attached to the bill. Republican Senators intend to include as many as 28 amendments to the bill, including provisions that would open offshore drilling, a move opposed by Democrats.

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Excessive speculation and cognitive dissonance

Thursday, June 19th, 2008

With the recent Senate hearings and everybody debating the affects of speculation by index funds, we have been inundated with politically motivated noise demonizing everyone from hedge funds to oil companies and those who would both support or oppose offshore drilling. In an effort to go beyond the self-serving blather, here are three unique observations offered to me in the past several days on the subject.

“The typical line of reasoning is that commodity index funds exclusively buy and hold commodities, and this buying represents a permanent increase in demand, which naturally results in higher prices,” says John Joseph of commodity trading advisory SEMA4 Group. “Of course, this buying and holding activity is no different from the buying and holding activity performed by equity index funds. And yet commodity index activity has been branded as a threat to our economy, while equity index funds receive quite the opposite treatment. This is hypocritical at best and disingenuous at worst.”

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It’s the dollar, stupid

Monday, June 9th, 2008

Cause and effect is always a tricky concept and that is most true when it comes to markets. With only two directions to go any explanation can seem valid. So when the Dow Jones Industrial Average dropped nearly 400 points on Friday there where many explanations out there.

The sharp increase in the unemployment rate, to 5.5% from 5% — when most expectations called for a minor increase to 5.1% — was obviously what got the bears rolling and the consensus is that the sharp increase in crude oil is what kept up the selling pressure.

I would suggest that Comments from European Central Bank (ECB) President Jean-Claude Trichet, suggesting that the ECB could soon raise interest rates to address rising inflation is what triggered dollar weakness and consequently the oil rally but it has already been determined that evil speculators are the only cause of higher oil prices. Isn’t it nice for “big Oil” and Opec that there is a new scapegoat on the block to point at.

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Transparently political

Friday, May 30th, 2008

Nothing appears to generate efforts towards transparency and compliance more than the threat of government regulation and on Thursday the Commodity Futures Trading Commission (CFTC) and Intercontinental Exchange (ICE) announced steps to create greater transparency in the reporting of energy trading in general and crude oil in particular.

The CFTC announced “multiple energy market initiatives,” in a release yesterday. That was followed by a release from ICE stating that it had facilitated the development of a cross-border program to provide enhancements to its energy market data reporting in concert with the CFTC and the U.K. Financial Services Authority (FSA) related to its West Texas Intermediate (WTI) crude oil futures contract.

The moves may have been prompted by multiple efforts in Congress to place blame somewhere for rising energy costs. The Oil Trading Transparency Act seeks to apply U.S. reporting requirements to non-U.S. markets and the Consumer-First Energy Act of 2008 calls for higher margins on crude oil futures.

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Before the fall

Tuesday, March 11th, 2008

Remember when $100 per barrel crude was a big story? Wondering when $110 crude will be the headline? In overnight trade on Nymex last night, crude traded at $109.72. But, in a conversation the morning of Monday, March 10, Timothy P. Evans, energy analyst for Citi Futures Perspective, offered a contrarian argument with some interesting and well grounded comments on the run-away market.

Here are some highlights:

“Fundamentally this is a bear market. It’s a market that is drawing a flow of buying on issues that are not directly related to the physical crude oil market, such as the weakness of the U.S. dollar and broader inflation expectations. So we are using crude oil as a hedge against a weaker dollar and as a hedge against inflation; and that’s why it’s $107 per barrel. We don’t have tight inventories; we have gasoline inventories at their highest level since March of 1993. And apparently, that is not enough inventory to turn the market lower. And so to my eye this looks like a bubble.”

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Happy New year – Where's your wallet?

Friday, January 4th, 2008

Now you’ve gone and done it.

Crude oil finally crested the $100 per barrel mark; and today the long forecasted recession appears to have finally manifested, what with the unemployment rate increasing to 5.1%, the highest level in two years, and the anemic 18,000 new jobs reported this morning.

I would like to take a moment though to suggest that it’s probably not the end of the world. In many ways, $100 crude is just a big fat round number, and because we had never hit it, $100 became an important psychological target. And much like the four-minute mile, people have been watching, waiting and trying to hit that mark for years – eventually it will happen. But a more important number might be $105, or even $110 per barrel, which is probably closer to the inflation adjusted high from 1980. And another very important factor is the country’s oil consumption as a percentage of gross domestic product. In 1980, energy accounted for 15.13 cents of every dollar of U.S. productivity. Now it is only 8.75 cents.

What does that mean? As a country, and including industry, we are almost twice as efficient in our energy usage. And that’s not my opinion, that comes from the Energy Information Administration.

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