Bankrupting the Common People
Oil Hits 18-month High, Pulling in Investors
It truly takes a global village of manipulators and their lackeys to pull off a con on the scale of oil, but it’s also the most profitable scam ever perpetrated on the people of this planet as they take control of a vital resource and then create artificial shortages and drive speculative demand in order to charge you an extra dollar per gallon of gas. - Goldman's Global Oil Scam Passes the 50 Madoff Mark, Phil’s Stock World, November 12, 2009April 1, 2010
Reuters - Oil hit an 18-month high on Thursday, breaking up above previous trading ranges and drawing in fresh inflows from investors at the start of the new quarter [See Global Oil Scam: There is No Shortage!].
The move higher came despite a stronger dollar, which often dampens enthusiasm for commodities, and after news of yet another build in U.S. crude oil inventories.
U.S. crude for May delivery rose 70 cents to $84.46 a barrel by 0958 GMT, after hitting an intraday high of $84.62 and settling at $83.76 a barrel Wednesday, the highest close since October 2008.
London ICE Brent climbed 73 cents to $83.43.
Crude oil futures will not trade Friday in either New York or London because of the Easter holiday.
"Upward momentum is very strong," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. "The market is rising even with a stronger dollar and even after what were bearish figures on U.S. inventory levels."Oil prices dipped briefly Wednesday after government data showed U.S. crude inventories rose by 2.9 million barrels to 354.2 million barrels last week, their ninth straight gain. Gasoline stockpiles logged a modest but unexpected gain.
"Money is flowing into commodities at the beginning of the new quarter from all sorts of investors, including funds."
But the market soon returned to strength.
"We suspect that with the dollar no longer rallying, (at least for now), commodity markets have been able to build a head of steam. In addition, simmering geopolitical tensions could also be at work," said Edward Meir at brokers MF Global.He said talk of a possible new round of sanctions against Iran, maybe within weeks rather than months, could be underpinning the market. But he added a note of caution:
"With respect to short-term pricing trends, we suspect there might be a temporary pause in the rally," Meir said.U.S. front-month crude oil rose 5.5 percent in the first quarter, its fifth consecutive gain. But although it has more than doubled from a December 2008 low, it is still well short of a record high near $150 a barrel hit earlier that year.
"Although the market will likely take this level out given the way it has been trading of late, we still would caution against joining this latest advance, tempting as it might be."
After wild swings in the past two years, oil has stabilized recently near the range favored by members of the Organization of the Petroleum Exporting Countries between $70 and $80.
Last quarter, oil traded from a peak of $83.95 in January to as low as $69.50 a barrel in February, a range of less than $15.
Implied volatility for U.S. crude is now around its lowest level since before prices surged to a record $147.27 a barrel on July 11, 2008, before plummeting to $32.40 five months later.
Technical chart analysts said oil's break up Thursday through resistance levels above previous trading ranges suggested the market could move quite a lot higher.
"With the break of the previous highs, positive momentum is starting to be created in WTI and the next target will be $85.00 per barrel," said Olivier Jakob, at Petromatrix in Zug. "Above $85.70 per barrel there will be no solid resistance until $90."With commodities markets still closely watching economic developments, investors awaited Friday's non-farm U.S. payrolls for March, forecast to have increased in a Reuters survey.
A rise would mark only the second time payrolls have risen since the recession started in December 2007, although this might be partly on the back of hiring for the 2010 census.
U.S. Crude Ends at Highest Since October 2008 on Dollar
March 31, 2010Reuters - U.S. crude oil futures on Wednesday ended at their highest level this year and posted loftiest settlement for a front-month crude contract in almost 1.5 years, as a weakening of the dollar attracted buying.
The rally developed after a sell-off petered out following government data released mid-morning that showed a larger-than-expected increase in domestic crude stocks last week.
On the New York Mercantile Exchange, crude for May delivery CLKO settled up $1.39, or 1.69 percent, at $83.76 a barrel, gaining for the third straight day.
It traded from $83.22 to $83.85, shy of the 2010 high of $83.95 hit on Jan. 11. On a settlement basis, the day's close was the highest since front-month crude ended at $86.59 on Oct. 9, 2008.
Gases Prices Expected to Exceed $3 Gallon This Spring and Summer
March 9, 2010USA TODAY - The national average price for a gallon of gasoline is up 9 cents in a month and will likely crack $3 in coming weeks, given a typical spring rally before the summer driving season, oil and gas analysts say.
Motorists may not see prices go much higher — or even stay that high throughout the entire summer — given the weak economy and the ability of refiners to kick up production, analysts add.
"Three dollars a gallon is probably a pretty rich price for the U.S. in 2010," says Tom Kloza, analyst for the Oil Price Information Service.The national average for a gallon of regular gasoline rose 0.6 cents Monday to $2.75 a gallon, up 81 cents from a year ago, says auto club AAA, Wright Express and the Oil Price Information Service.
Kloza expects $3-a-gallon gas in parts of the country within the next month. The Energy Information Administration, the forecasting arm of the Department of Energy, also predicts that pump prices may exceed $3 a gallon at times during the spring and summer.
Several factors may keep prices from rising much higher, including:
- Unemployment
The nation's unemployment rate stood at 9.7% in February.
"People just aren't driving to work like they were," says Jim Ritterbusch, president of oil trading adviser firm Ritterbusch and Associates.
The number of vehicle miles traveled in the U.S. last year was about flat with 2008 but down 3% from the peak year of 2007, data from the Federal Highway Administration say.
Ritterbusch doesn't expect much increased demand for gasoline until the unemployment rate falls below 8.7%. In the meantime, he expects gasoline to peak at $3 a gallon to $3.25 a gallon between now and the Fourth of July.
Then, he says, he expects weak demand to drive prices lower for the rest of the summer. - Refining Capacity
U.S. refineries are running about 14 million barrels a day of crude oil but have the capacity to run nearly 17.7 million a day.
The prospect of higher prices could encourage more production, which Kloza says could lead to greater supply and keep a lid on higher prices at the pump.
If that's the case this year, some regions of the U.S. will see gas at $3.25 a gallon or more, Beutel says. That's enough to cause trouble for an economy struggling for traction.
In parts of California, the average price of a gallon of regular gas is already over $3, the Energy Information Administration said Monday.
"It does have a chance to nip part of the bud of any incipient recovery," Beutel says.A big wild card in summer gas prices is the impact investors will have on oil prices, Beutel says.
Prices are up about 15% in the past month on hopes of an economic recovery and the flow of money into oil. Investors, such as pension funds, are increasingly buying oil as an asset, Beutel says. [See Wall Street Speculators Blamed for Oil Price Spikes.]
At times, he says, that's driven up oil prices beyond what supply and demand would dictate.
Investment Banks are Big Players in Energy Markets
The top three players: Goldman Sachs, Morgan Stanley, Barclays PLCOriginally Published on June 19, 2008
Reuters - Investment banks are big players in the energy markets, where an oil price boom has increased demand from a whole range of companies for products that can offset the risks of volatile prices.
The banks also can trade on their own account, so-called proprietary trading, where they bet their own cash in the oil futures and over-the-counter markets.
Some also make investments in energy-related infrastructure assets, such as pipelines, transportation and storage facilities.
The top three players are Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Barclays Capital (BARC.L), the investment bank arm of UK bank Barclays Plc.
Goldman Sachs and Morgan Stanley, once know as the "Wall Street refiners", have been active for two decades, Barclays Capital has built its business over the past 10 years.
Banks are increasingly active in the physical oil markets, where they say they need a presence to satisfy client needs and to gain access to information.
Both Morgan Stanley and Barclays Capital, for example, trade physical crude oil.
The futures markets where oil is traded include the New York Mercantile Exchange NMX.N, the world's biggest energy futures market, and ICE Futures Europe, owned by Atlanta-based Intercontinental Exchange Inc (ICE.N).
Oil and other energy derivatives are also traded over-the-counter. These markets are estimated to be between 10-15 times bigger than the ICE and NYMEX.
Other banks have expanded in energy and commodities, but fallout from the credit crunch has forced some of the newer participants to cut back or pull out.
Lehman Brothers LEH.N has been expanding as well as Citi (C.N) and Deutsche Bank. French banks BNP Paribas (BNPP.PA) and Societe Generale (SOGN.PA) have also have a presence.
Some of the banks' recent moves in energy and commodities are listed below.
The U.S. bank said it would close its London commodities and trading desk and centralize operations in New York.
The bank currently has around 250 staff in energy and other commodities, spanning oil and refined products, metals, power and gas, coal, agriculturals, emissions and investment products.
It has entered into a 5-year partnership with China Development Bank to develop a commodities business in the country.
The firm recently started trading physical crude oil and has also entered the physical gasoline barge market in Europe and is also active in diesel trading.
Its emphasis has been on newer markets such as freight, power and gas, carbon emissions and coal, but the firm also trades oil, precious and base metals and agricultural markets.
In March, the bank hired 8 new staff, including 4 for its oil trading business, based in London.
David Silbert, who was previously with Merrill Lynch MER.N, is global head of the business, which recently opened a new office in Houston in the United States.
The U.S. bank added 50 people to its commodities and energy trading and investment team last year and aims to hire a similar number this year, giving it a team of 450 globally.
JP Morgan is taking on staff from the energy business of Bear Stearns, the rival investment bank it is in the process of taking over.
The firm trimmed some energy traders and back-office staff in April in the United States and Europe.
It had expanded its crude oil trading operation into Europe, after trading crude in North America since 2005 and subsequently launched power and gas in Europe.
But in January of this year, the bank announced that the European power and gas business would focus on northwest Europe and the UK and that it would place more emphasis on client business, reducing its proprietary trading activities in European power and gas.
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