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As Expected, CME Follows ICE, Proceeds With First Crude Margin Hike Since March 2009

Tyler Durden's picture





 

As usual, our Onionesque predictive powers are spot on. Two hours ago, when we reported the ICE margin hike, we stated: "We expect the NYMEX will follow suit on its own WTI contract margin hike any minute." 60 minutes later, this prediction comes true. Per Bloomberg: "CME Group’s New York Mercantile Exchange plans to raise margin requirements on its light, sweet crude oil contract for the first time since March 2009, according to the exchange. Margins for speculators will increase to $6,075 per contract from $5,063, and for hedgers to $4,500 from $3,750, according to a notice on the CME’s website. The change will take place after the close of trading tomorrow." The heavy artillery in crude is out. And while margin hikes do nothing any more for silver and gold, the weak hands in crude have at least two rounds of margin hikes before they are flushed out. Of course, the half life of margin hikes is about 2-3 days. We expect this increase to be internalized very quickly. The next one will be priced in within hours. And the third one will be ignored. After that... who knows.

 


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Thu, 02/24/2011 - 18:25 | Link to Comment 66Sexy
66Sexy's picture

The dollar didn't benefit at all from the commodities drop... where is the money going??

 

Margin hikes? Tell a child he can't have something, and guess what? The child will use any means necessary to acquire it. I love how administrative intervention always results in the opposiite of the desired outcome... aah, the illusion of control.

Thu, 02/24/2011 - 18:33 | Link to Comment whatsinaname
whatsinaname's picture

Yes, noticed the dollah is in freefall last few days.

Thu, 02/24/2011 - 18:39 | Link to Comment cougar_w
cougar_w's picture

Did anything happen in the dollar swap lines? EU must be knocking Ben's door down right about now.

Thu, 02/24/2011 - 18:56 | Link to Comment lucasjackson
lucasjackson's picture

When the hell did that start????? Are you trying to tell me the dollar is worth less tomorrow than it was yesterday?

Thu, 02/24/2011 - 18:39 | Link to Comment Sudden Debt
Sudden Debt's picture

Into commodities actually.

The commodities dropped, but gold and silver are like vacuum cleaners for excess money.

Bernanke hates it that gold and silver go up, but if nobody would buy it, there would be to much liquidity on the streets.

 

Thu, 02/24/2011 - 18:43 | Link to Comment 66Sexy
66Sexy's picture

?? gold and silver both down ?? oil down.. dollar down... where'd the money go?

Thu, 02/24/2011 - 18:47 | Link to Comment Sudden Debt
Sudden Debt's picture

These where forced down, it's not like demand dropped because that keeps going up.

Gold, silver, platinum, copper, paladium, diamonds, art... are all still sucking it all up.

Also, sentiment for a crash is now at 41%! So a rise in put activity will soon be headlines.

Thu, 02/24/2011 - 19:43 | Link to Comment geminiRX
geminiRX's picture

China Green Agriculture:)

Thu, 02/24/2011 - 18:25 | Link to Comment Ancona
Ancona's picture

Fuck the profiteers, jack margins and get it under control......right? Except they only do it when JPM et. al. are getting hurt.

Fucking hypocritical bastards. They are all a bunch of fucking pussy communists.

Thu, 02/24/2011 - 18:50 | Link to Comment DeeDeeTwo
DeeDeeTwo's picture

You are so fucking suave, baby.

Thu, 02/24/2011 - 18:26 | Link to Comment Flakmeister
Flakmeister's picture

Pissing into the wind....

Thu, 02/24/2011 - 18:28 | Link to Comment buzzsaw99
buzzsaw99's picture

So then end user demand is driving oil prices. :rolls eyes:

Thu, 02/24/2011 - 18:34 | Link to Comment nonclaim
nonclaim's picture

Exactly, it's been a while since futures stopped being about the future. We need a new name for derivatives that don't derive from real assets but from wild rumors.

Thu, 02/24/2011 - 18:56 | Link to Comment DeeDeeTwo
DeeDeeTwo's picture

You have no clue about futures markets. If Saudi Arabia shuts down crude goes > $200, easy. And if Israel attacked all bets are off. So a 10% chance of this happening in the next 6 months... adds $10 to the price of oil. Markets are a lot more rational and efficient than your average Airchair Revolutionary, baby.

Thu, 02/24/2011 - 19:33 | Link to Comment -1Delta
-1Delta's picture

I dont blog here much bc some of you all are fucking idiots

pardon my french

http://content.screencast.com/users/wprosser/folders/Jing/media/6ecdbbd2...

Thu, 02/24/2011 - 20:36 | Link to Comment nonclaim
nonclaim's picture

[...blahblah...] If Saudi Arabia shuts down crude goes > $200, easy. And if Israel [...blahblahblah...]

Of course all this goes away when a technocrat hikes futures margins for the sake of world peace.

Thu, 02/24/2011 - 20:59 | Link to Comment -1Delta
-1Delta's picture

yes as if a margin hike matters... same P&L, less money down... who the hell cares

Thu, 02/24/2011 - 21:28 | Link to Comment nonclaim
nonclaim's picture

It matters if you have to adjust the total amount in a position to a certain risk profile. It's not like everybody is a cowboy trader... some actually have legal responsibilities.

Thu, 02/24/2011 - 22:40 | Link to Comment earnyermoney
earnyermoney's picture

legal responsibilities? LOL. going on 4 - 5 years of government sanctioned fraud in the FIRE industry and you believe there are legal responsibilities?

Thu, 02/24/2011 - 18:35 | Link to Comment Rainman
Rainman's picture

...yeah, I always wonder what genuine end users like the airlines are noodling up about their hedges with all this bullshit going on. It's a red/black pick one on the roulette wheel.

Thu, 02/24/2011 - 18:36 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

End user demand and supply shocks are only part of the equation.  The underlying reality is that these countries mostly have currencies that track the USD, and if they're economies are in a temporary or extended state of "fucked" status, that hurts the value of the USD, and inversely, helps the value of oil.  It's kind of an enhancement of an already dangerous correlation.  Regardless of demand, one can agree that supply is going to look shittier, and the economies of these countries are going to look shittier.  End user demand drops are mostly meaningless in the face of this. 

Thu, 02/24/2011 - 18:52 | Link to Comment buzzsaw99
buzzsaw99's picture

Margin is bogus, it is used by speculators and manipulators only. Force them to take delivery and the number of contracts traded goes south fast.

Thu, 02/24/2011 - 18:55 | Link to Comment mynhair
mynhair's picture

+ HooRah!

Delivery would kill them.

Thu, 02/24/2011 - 19:04 | Link to Comment Rainman
Rainman's picture

That CFMA passed in 2000 is the commodities' version of the gutting of Glass-Steagall....largely going unnoticed since the Enron electricity futures game. Things are too fucked up after 11 years to fix the oil spec mess at this point.

Thu, 02/24/2011 - 19:05 | Link to Comment Rainman
Rainman's picture

...

Thu, 02/24/2011 - 18:42 | Link to Comment Ray1968
Ray1968's picture

Why isn't anyone using the word contaigon? The riots are spreading like a virus spreads.

Just wait until the rest of the Middle-East falls. This story is far from over.

Thu, 02/24/2011 - 18:29 | Link to Comment Scottj88
Scottj88's picture

The walls are crumbling, the ponzi scheme is about to fall apart...

http://thehardrightedge.com/troubledwaters/

Thu, 02/24/2011 - 18:30 | Link to Comment malikai
malikai's picture

...just in case anybody forgot who is boss around here.

Thu, 02/24/2011 - 18:31 | Link to Comment cossack55
cossack55's picture

So the question:

What to burn first?

a. DC

b. Wall St.

c. Chicago

 

Thu, 02/24/2011 - 18:37 | Link to Comment Sudden Debt
Sudden Debt's picture

I would use rock, scissors, paper if I where you.

 

 

Thu, 02/24/2011 - 18:38 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

L.A.

Fuck up the entertainment media supply chain, and the rest topples pretty quickly.

Thu, 02/24/2011 - 18:42 | Link to Comment Dr. Porkchop
Dr. Porkchop's picture

L.A.

Fuck up the entertainment media supply chain, and the rest topless pretty quickly.

 

Fixed.

Thu, 02/24/2011 - 18:49 | Link to Comment mynhair
mynhair's picture

TY, great visual.  Til I got to Meryl Streep..........

Thu, 02/24/2011 - 19:02 | Link to Comment JohnG
JohnG's picture

The Creed of the Sociopathic Obsessive Compulsive states clearly that when given the coice, take both (or all three...but I would add a few places to this  list).

 

http://doug-johnson.squarespace.com/blue-skunk-blog/creed-of-the-sociopa...

 

Thu, 02/24/2011 - 18:32 | Link to Comment JimRogers
JimRogers's picture

Tyler: You have truly stepped up your game in the past few weeks. Kudos to you and your successful tunneling!

Thu, 02/24/2011 - 18:36 | Link to Comment mynhair
mynhair's picture

Can't wait for 110% margin requirements.  Pay to play seems the du jour way.

Thu, 02/24/2011 - 18:43 | Link to Comment cougar_w
cougar_w's picture

Von Bernankstein would just bail those guys out, too. And GS would somehow front run the whole thing.

Thu, 02/24/2011 - 18:50 | Link to Comment cougar_w
cougar_w's picture

Fine. They can be that way.

How about this. You lure them out into the open with that "please open the door for me" act of yours, and then I'll rip their lungs out. We should be able to clean this whole thing up in a couple hours, wouldn't even be serious work.

Thu, 02/24/2011 - 18:57 | Link to Comment mynhair
mynhair's picture

A great team act it would be.  I'll even cutely scratch at the door.

Thu, 02/24/2011 - 18:52 | Link to Comment baby_BLYTHE
baby_BLYTHE's picture

Start handing out money. There is no "Free Market Miracle" coming to save America.

We need a new NEW deal! 5 Trillion dollars invested IN AMERICA

Webster Tarpley is the man!

http://tarpley.net/five-point-program.pdf

This is called "American School Economics". The very system endorsed by the Founding Fathers.

http://en.wikipedia.org/wiki/American_School_%28economics%29

Thu, 02/24/2011 - 19:11 | Link to Comment chump666
chump666's picture

consolidation. just repricing for another leg of selling.  that f**** nut Geithner saying the US can handle $100 (oil), he was able to lift the 10yr UST with his BS. 

 

Thu, 02/24/2011 - 19:59 | Link to Comment 101 years and c...
101 years and counting's picture

the sheeple wont riot over surging gold or silver.  they WILL riot over surging gas and food.  TPTB will kill this oil rally.

Thu, 02/24/2011 - 23:22 | Link to Comment Everyman
Everyman's picture

They can TRY to kill the oil rally, but it will fail.  THis whole bunch of shit was caused by that brain dead son of a bitch Bernake.  Set the fucking world ablaze to devaluate the dollar inflate the world food and commodity prices and viola world revolt.

So If you think these fucking financial fuckwads could not handle the 20% rise in less than a week co you really thinkthey can control a fucking thing?  no way.  Oil is going up

This is where the world burns, and hopefully there will be a revolt, and those that did this shit will be beaten to a fucking bloody pulp.

These idiots are probably now buying Oil Futures, the equities will then flounder.  too many balls to keep in the air with POMO now and POMO was already becoming less and less effective.  From 2'5 Billion dollars every third day to EVERY DAY 10 Billion dollars.  The money will fail to have effect and they cannot buy more expensive oil futures AND more expensive equity futures as well.

Thu, 02/24/2011 - 20:15 | Link to Comment pitz
pitz's picture

The more money that producers have to tie up in margin downpayments, the less money they can invest in new production.

This move also makes it more expensive for funds to short oil contracts.

Fri, 02/25/2011 - 02:19 | Link to Comment ThirdCoastSurfer
ThirdCoastSurfer's picture

There was some kind of initiated contract record established in the overnight trading that pushed crude to $103 (during the Asian market) and the action was so swift and so late that that someone is just getting to work right now to find a margin call notice in the e-e-mail. Fortunately, when the contract was a hedge against your $280,000 BMW license fee, it just the cost of doing business with a desperate democracy. 

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