Tag: Oil price

Wow. Turns out that in 2008 (into the mega rally time period) someone may have been “squeezing” oil after all.

As the FT reports:

The US commodities regulator has charged a trading house and two individuals with manipulating oil prices in 2008 by amassing dominant positions in the physical market that created the impression of a shortage. The charge is only the second oil manipulation case the US Commodity Futures Trading Commission has filed since launching a “nationwide crude oil investigation” three years ago as the cost of West Texas Intermediate, the US benchmark, surged towards a record high of $147 a barrel.

Having been proven right about their prediction of a rather substantial correction in commodities  earlier this month, Goldman Sachs is now out with a new view.

A bullish view.

Contrary to popular belief, analysis of the latest CFTC position data is beginning to show that it wasn’t so much the ‘froth‘ in the market that was responsible for this month’s run-up and subsequent commodity price collapse, but the professional fund community.

John Kemp at Reuters has pored over the latest data set and concluded, amongst other things that:

There were no significant changes among producers, consumers and merchants, or in the “other reporting” category. Swap dealers’ trimmed their massive short position, but that was the mirror image of long liquidation among the hedge funds and small speculators, for whom the swap dealers act as market makers and counterparties.

—–

Long liquidation in the week ending May 6 was equivalent to the mean plus two standard deviations, which was not abnormally large. There have been four larger adjustments this year alone and five in 2010, a period characterised by unusually low volatility.

Kiran Stacey

The warnings may finally be coming true. Four months after the OECD warned that the soaring oil price could damage the economic recovery in developed nations (since when Brent has advanced another 19 per cent), the IEA has noticed that global oil demand has begun to flatline.

In its March Oil Market Report, it notes the first month of near-zero growth since the summer of 2009, which was just as the recovery was getting under way.

Part of the decline in demand is because of the Japanese refinery capacity which was knocked out by the earthquake and tsunami.

The justification for Wednesday’s commodity rout is still that RBOB futures fell (or crashed) after the EIA reported larger than expected US stockbuilds in gasoline. The more than 8 per cent move, in the usually much more stable contract, saw the CME lift margins for speculators by 21.4 per cent for Thursday.

But is the RBOB situation really all that simple?

Yes, it is true that RBOB cracks — the difference between the price of gasoline and oil, which determines how much of an incentive there is for refineries to process crude — were looking more than toppish.

Kiran Stacey

Thursday’s dramatic drop in the price of oil and other commodities has left markets reeling.

The rout has continued on Friday morning, and at the time of writing, Brent is down at around $105 a barrel, from about $125 on Monday.

But with no obvious trigger for the sell-off, traders and analysts are offering varying interpretations as to why it is happening, and, especially, why now.

 

Kiran Stacey

The Dora oil refinery near BaghdadIraqi officials are preparing to cut the country’s oil output targets from 12m b/d to somewhere between 6.5m and 7m b/d, according to The Times.

The paper reports that ministers in Nouri al-Maliki’s regime argue that such a glut of supply could depress prices, and would outstrip demand. But experts have been warning for a long time that the country could never meet its initial targets anyway.

Kiran Stacey

Oil production at the Sarir and Misla oilfields could restart within weeks, the Libyan National Transition Council has said.

The facilities above the wells had been shelled by Gaddafi loyalists, which brought production to a halt. But rebels are confident they could soon have oil flowing again down the pipeline to Tobruk, which they say has not been damaged. This would bring back an estimated 300,000 b/d of production, which could help the constrained oil markets.

The news, which was broken by Petroleum Economist, does not appear to have made a dent in the oil price though, which has bounced back after a shaky start this morning. That may be because the rebels have made similar predictions before, telling the FT in early March that production could restart in two weeks.

Kiran Stacey

Brent priceThe only thing more surprising than the comment from Ali Naimi, the Saudi oil minister, that the oil market is oversupplied, is how seriously the market appears to have taken it. The oil price has dipped sharply today, according to some at least, because of Naimi’s comments.

The evidence Naimi cites is that the Saudis cut output last month by some 800,000 barrels per day. Some of this may have come from reduced Japanese output, after the earthquake put many of its refineries out of action. But this demand is likely to return relatively soon – it certainly shouldn’t be viewed as gone from the market in the long term.

Kiran Stacey

In this week’s readers’ Q&A session, Amrita Sen, oil analyst at Barclays Capital, answers your questions.

In this second of two posts, she discusses drilling in the US, national oil subsidies and growing demand from the Middle East.

Earlier, she answered questions on whether speculation is driving up the oil price, whether such an increase could trigger another recession and when “peak oil” might occur.

(NB – Because of a very high volume of questions, we were not able to tackle every question submitted. Apologies if yours was not answered.)

Next week, Michael Bromwich, director of the US oceans regulator, will be answering your offshore-drilling queries. Email questions to energy.source@ft.com by the end of Sunday, April 10th.

But for now, over to Amrita:

Energy Source is no longer updated but it remains open as an archive.

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