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View Full Version : Why is oil in the commodities market?



chappy
08-03-2009, 10:17 AM
Not sure if this belongs in this area or politics, but I never could figure it out. I've been watching crude oil prices, home heating oil and gasoline futures rise rather quickly the last few weeks, and I know it's a safe haven for peoples money, but I always thought it was based on demand? I don't know too much about it, but can anyone explain why oil is in the commodities market, and what would it take it to get it out?

I'm sure there's a reason it's in there, and it's probably a good one. I just want to know why.:)

BUIZILLA
08-03-2009, 10:21 AM
front page article in today's localpaper stated that futures were going up due to ANTICIPATED additional usage.... not documented mind you, just speculative anticipation... if Israel drops their watermelon in December, oil will be $5 within an hour..

The Hedgehog
08-03-2009, 10:28 AM
I am usually not all that Pro-regulation, but it would probably be helpful if they would require players in this market to be able to take delivery. I am all in favor of hedging but the speculators are driving this market nuts.

handfulz28
08-03-2009, 11:33 AM
but it would probably be helpful if they would require players in this market to be able to take delivery.

It's going to take more than that. Goldman and Morgan Stanley (and most likely others) actually own large oil operations. They did take delivery last year and I'd bet a $1 that the Citigroup trader that's generating all the fuss over his $100 million pay package, has rented a couple tankers for storage.

Oil futures are there because there was a time when oil barely traded for the cost to get it out of the ground. The market needs liquidity so speculators are allowed in. Also consider that there are a few "markets" for oil, around the globe. If there's going to be a change, it has to happen simultaneously across all exchanges.

I forget if it was a PBS special or a 60mins special, but they uncovered the fact that Goldman got themselves a special exemption for oil trading. Things like "the dark market" need to be exposed, and repealed, and the market needs to be returned to it's users instead of just being another asset class to invest in.

gcarter
08-03-2009, 11:42 AM
It's going to take more than that. Goldman and Morgan Stanley (and most likely others) actually own large oil operations. They did take delivery last year and I'd bet a $1 that the Citigroup trader that's generating all the fuss over his $100 million pay package, has rented a couple tankers for storage.

Oil futures are there because there was a time when oil barely traded for the cost to get it out of the ground. The market needs liquidity so speculators are allowed in. Also consider that there are a few "markets" for oil, around the globe. If there's going to be a change, it has to happen simultaneously across all exchanges.

I forget if it was a PBS special or a 60mins special, but they uncovered the fact that Goldman got themselves a special exemption for oil trading. Things like "the dark market" need to be exposed, and repealed, and the market needs to be returned to it's users instead of just being another asset class to invest in.

Yes, this is the reason...because it was de-regulated.
Needs to be looked at again.

The Hedgehog
08-03-2009, 11:42 AM
It's going to take more than that. Goldman and Morgan Stanley (and most likely others) actually own large oil operations. They did take delivery last year and I'd bet a $1 that the Citigroup trader that's generating all the fuss over his $100 million pay package, has rented a couple tankers for storage.

Oil futures are there because there was a time when oil barely traded for the cost to get it out of the ground. The market needs liquidity so speculators are allowed in. Also consider that there are a few "markets" for oil, around the globe. If there's going to be a change, it has to happen simultaneously across all exchanges.

I forget if it was a PBS special or a 60mins special, but they uncovered the fact that Goldman got themselves a special exemption for oil trading. Things like "the dark market" need to be exposed, and repealed, and the market needs to be returned to it's users instead of just being another asset class to invest in.

Yes, but it would be a start. It would be good to know how many hedgefunds at specing on oil.

The players that actually take delivery will get burned in the end if they have no use for it and the demand is not there. True supply and demand will sort out that long term.

BUIZILLA
08-03-2009, 12:21 PM
The players that actually take delivery will get burned in the end if they have no use for it and the demand is not there. no downside there..

MOP
08-03-2009, 01:51 PM
I thought there was mention of the Gov trying to get a handle on the trading. My heating oil companies buys early summer for fall, I would guess that many do. Maybe that is part of the reason for the spike, holiday weekends also play a part not sure what else dose.

gcarter
08-03-2009, 01:57 PM
I thought there was mention of the Gov trying to get a handle on the trading. My heating oil companies buys early summer for fall, I would guess that many do. Maybe that is part of the reason for the spike, holiday weekends also play a part not sure what else dose.

I don't think so. I think the traders just keep trying for something that's not going to happen in awhile.

Ghost
08-03-2009, 03:36 PM
Somehow I have this sick feeling that Wall Street puts a ton of money they control on black. If they win, they collect the winnings. If they lose, we have to bail them out again.

Any truth to this in the oil markets?

handfulz28
08-03-2009, 04:07 PM
If they lose, we have to bail them out again.

Any truth to this in the oil markets?

Don't get me started on how much TARP has been paid back versus "other" government assistance that will have little ROI. :bonk:Plenty of "Wall Streeters" wanted nothing to do with TARP and they were forced to take it. This is on record during congressional testimony.

Wall Street runs the oil concession...they never lose that game.

Ghost
08-03-2009, 04:57 PM
I believe many did not want TARP. I am more asking whether with the presumption of a bailout backstop, if we are encouraging ventures with high potential reward but a lot of risk, and potentially seeding the irresponsible folks on Wall St with a real argument about optimizing portfolios with which they may triumph over their responsible counterparts. I do not know the answer.

Mike

Cuda
08-03-2009, 08:11 PM
I have an ongoing battle with this other guy on another boating site about why oild speculators think they deserve to make a profit. They don't make the oil burn any better.

They remind me of vulture wasnting the first bite of carrion.