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Fadel Gheit Throws Wall Street's Big Banks Under The Oil Speculating Bus
By EconMatters
Public Relation people at Goldman Sachs can not be too happy about this.
Fadel Gheit, a veteran of Oppenheimer and oil and gas industry dating back to the Mobil era, went on record and called the Big Banks--Goldman Sachs. along with Morgan Stanley--out on manipulating the oil market during a Bloomberg TV interview on May 25.
Both Goldman Sachs and Morgan Stanley published notes on Monday, May 23, to clients recommending taking a long position on Brent crude oil. Specifically, Goldman boosted its year-end target for Brent by 20% to $120 per barrel from $105 and its 2012 forecast to $140 from $120. Goldman also raised its three-, six-, and twelve-month Brent price target to $115, $120 and $130 a barrel respectively. Morgan Stanley raised its 2011 Brent crude price forecast to $120 per barrel from $100 a barrel, and its 2012 forecast to $130 from $105.
Although the firm was not mentioned in the Bloomgerg interview, JP Morgan also reiterated its forecast that Brent should reach $130 a barrel by the third quarter of 2011.
Remember Goldman was the one telling clients on Monday April 11 to liquidate "CCCP” commodities basket for a 25% profit, which partly prompted a broad selloff in commodities including crude oil. Furthermore, at the time, Goldman said Brent would correct towards $105 a barrel in coming months.
So this flip flop just a short six weeks later not only contradicted some of the macroeconomic projection of Goldman itself, but also prompted a fire storm of criticism even from its peers. (Morgan Stanley at least has been consistent with its commodity bullish position.)
I'd imagine Goldman's surprise bear call in April probably threw a lot of investment houses under the bus as most of them are consistent in their long commodity call, and most likely invest and advise clients accordingly.
Here are some notable quotes from Gheit:
“...They can invent reasons why oil prices go to $130 or $150, but history has shown that these people are able to move markets. It is not Exxon or BP or Shell that moves the oil markets. It is the financial players. It is the Goldman Sachs, the Morgan Stanley, all of the other guys. It is a shame on the government that allows them to get away with that.”
“It is not illegal. All banks need to make a profit. The M&A business is not doing too well. Therefore, they need to improve their profit outlook and commodities has been the area where they make a lot of money. Commodity speculation is now a big driving force in Wall Street."
"Why did they [Goldman Sachs and Morgan Stanley] control hundreds of millions of barrels of oil if they cannot refine or mine. Because it is because it is legal and they can get away with it. As long as they make a profit, that is fine. Basically, the consumer will pay the price. The economy will slow down because of the few that will make a huge amount of profits.”
"[CFTC] has absolutely done nothing. They talked about this for three or four years. Nothing happens. Nothing changes and I think nothing will change. Any changes will be cosmetic because financial institutions have a lot of clout and the financial lobby is very strong. Much stronger than the oil lobby.”
Now that's a punch that packs a wallop and tells it like it really is pointing squarely at the real bigger fish than the three small companies and two oil traders that CFTC (Commodity Futures Trading Commission) is suing right now.
(Watch the Bloomberg clip on our blog or on Zero Hedge.)
Further Reading - Is Speculation The Reason For High Oil and Gasoline Prices?
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That’s Wall Street for you, where a typical position is held about 5 seconds, overnight is long term, and 90 days for all practical purposes is equivalent to infinity.
The saddest part about this form of business and capitalism that Gheit is describing is that it is wasteful and inefficient from a broad social perspective. For every dollar these Wall Street traders earn manipulating oil markets the rest of us loose a hundred or more, often to suppliers who our government officially recognizes as our enemies.
Does professional porn watching vary between government agencies? I would imagine the CFTC is big on midget porn, while the SEC is into BDSM.
GS, MS and everyone else participating in this unhappy action, is forcing you to your
1) Bicycle.
2) The smaller car that no one wants to buy.
3) Conservation of energy in general.
Are the Federalies more than happy to accomodate this? You betcha.
Sidebars :
1) The price of oil is putting tremendous pressure on currency pegs and other mercantilist practices. Those practices are job negative for US workers. They remain profit positive for Transnational Corporations. While the Transnationals remain profitable, this does fairly little in regards to half of the FED's dual mandate, full employment. With the level of current unemployed, someone has to pay the bills. Enter the FED, stage left with the Helicopters.
2) Those with pegs and mercantilist practices run lower energy efficiency in general, hence more pain.
3) Inflation is the effect of weaponized money on a strategic level. Oil is the sword. The banks are the hired guns -- or more appropriately given the metaphor, the Ronin ...
http://en.wikipedia.org/wiki/R%C5%8Dnin
Power tends to corrupt.
And absolute power currupts absolutely.
Lord Acton, 1887
Explanation of demand and price differential between light sweet crude and sour crude puts into question Jeff Rubin thesis that global trade will deminish in future due to projected high price of bunker fuel used in ocean transport . Bunker is low end of refining with little other use and therefore does not drive up price relative to other refined uses. He does give a good presentation
As Boris Badenov said some 50 years ago, "In Pottsylvania, The Party is the Thinking Man's Filter."
We can simply replace "The Party" with "The MSM/Wall Street Ivy League Cronies".
G8 is giving 40 billion to Arab countries with sagging economies and overpopulation problems. Unemployment is 10-15% in some of these countries. The quote in the WSJ article says it all:
"Jose Manuel Barroso, president of the European Commission, said the European Union said Arab countries needed "the three Ms"—money, markets and mobility—and that Europe would offer greater access to its markets and try to improve the management of migration between the two continents."
So, we are paying 40 billion to give them better access to markets? Maybe it would be more accurate to say that we are to get better access to their markets, and we are in exchange improving "the management of migration between the two continents." I kid you not, Europe is awash in Muslims (with no jobs) and they are selling greater access to our lands. This is a Greek tragedy.
is it true in the Ivy League that they teach one how to survive and prosper in an fascist crony capitalist state?
if you have to use GoldShort's reco's, you better have deep pockets
better off marrying a GS droid and entering parasite narvana
if you wish to do god's work, you may need to find another planet
The liquidity tail of the Wall Street speculator is wagging the oil market dog.
The capital markets are broken.
This is another symptom of another greater evil, Too big to fail.
The Squiditity Trap.
Perpetrated by the Calamari Ring.
The great reset of capitalism is coming. This can't continue indefinitely. The system is insolvent. You can't run from trillions of dollars indefinitely. With 60% of all government debt rolling over within 3 years, all it will take is rising interest rates and we are into a cascading collapse.
That's why the central banks are buying gold. They can't allow a collapse because it will be too difficult to get the peasants back in line and accept fiat paper and central banking. They are going to get all the gold they can and swap fiat for gold backed paper, and screw anyone who is stupid enough to think they aren't going to lose in the exchange rates. Then they ramp the value of gold in the biggest speculative bubble in history and pay off all the soverign debt and the real estate related debts of the big banks.
Screw DOW 13,000, that's so yesterday. The game is $44,000 gold baby.
Then, with their precious system saved, they can proceed to undermine the new currency, eventually taking us off the gold standard when everyone alive today is either dead or too old to care.
Rinse and repeat.
Goldman alum-run CFTC sitting on its tentacles? I'm shocked. Shocked!
I am solving the easy math problem now.
Squeeky Fromm, Girl Reporter
The recent released wikileak cable quoting the Saudis in 2008 telling US officials that there was a speculative oil bubble and that they couldn't find buyers for their crude is STUNNING.
The fact that a number of banks have an exemption from speculative activities shows a level of influence and corruption rarely seen in the public eye. It is unbelievable that these institutions can make the market and manipulate it is stunning. What I find most appauling is that it is only a handful of elitists who are profiting from it. Look what their actions did since 2008 to the lives of untold millions of people.
The great reset of capitalism is coming.
The Saudi's were not lieing...they were no buyers of the heavy sour crude laced with Vanadium and Nickel that they were peddling. Part of the reason was that they had because there is no refining capacity for it...they had at most 500,000 bpd of this stuff....
Why the hell did you get junked?
Flakmeister isn't lying. Canada is in the same boat with the oil sands. The process to refine it to a useable format is increadibly expensive therefore unaffordable. Unless people really want to buy a new car or get a complete engine retrofit, no one is driving on the sloppy crude that is being pumped. Other than heating and a shit tonne of really bad emmissions, the oil is practically worthless (or worth so much as to be considered worthless).
The world runs on sweet light crude, not the heavy slop under it.
+1.
Whenever you hear the PTBs speak about oil, they say there's lots and lots...which is a half-truth. Sure, there's lots, but it's the expensive nonconventional stuff that on a Net Energy basis (using Chris Martenson's lingo) is much less attractive than the conventional cheap stuff.
WSJ had this article posted last week that does talk about all that Saudi oil:
Facing Up to End of 'Easy Oil'http://online.wsj.com/article/SB10001424052748704436004576299421455133398.html?mod=WSJ_hp_LEFTTopStories
I think the only only thing Flak lies about is his age and only in the good bars. Calling all of this stuff "oil" is a dumb and deceptive thing to do. Reminds me of the term "divorce" Think the courts should use one word for folks who have no kids and another for those who do since theyre stuck interacting till the kids grow up. And those tar sands take an incredibly oh nonproductive amount of fresh water to process as well
LOL, for the record and I have stated this before... I am a ripe old 48 and semi-retired. Still have all my hair....
The politically correct description is "Unconvential Oil"...
Re: the junking... I have a secret fan club here.
Want to buy futures...great. Take delivery. End of "speculation". Period
Oh yeah that would be great. There'd be no liquidity, people would be loathe to underwrite futures contracts, and prices would go through the roof for agriculture/energy even more than they have. Genius.
imagine all those monies being forced out of futures and into working capital positions.. WOW!
Do you have a clue how commodities markets were prior to futures markets? Prior to extremely liquid futures markets? I guess not.
An historically valid point. However, can you elaborate on your point and then provide an overview on how the markets would work? Are you suggesting that the markets are operating fairly and transparently under current structures? Do changes need to be made, if not?
I believe they are not and need the regulation body and clearing houses need an enema, one thorough enough to provide an effectively regulated umbrella, one that provides chokes such as position limits, supported by RICO style laws in the event collusion.
The markets would work however individuals structured them to work through voluntary exchanges which express their values. They would not work based upon government coercion; because they cannot work that way. How can something manipulated and hampered by the State be "fair and transparent"? It's not really a market, it's an interventionist conglomeration. How bad can the government screw everything up before you and others with your thought process stop asking them to regulate more? Haven't you seen what happens?
Too simple. Too effective. Like "Pay Congress salaries out of budget surplus".
Ha!Ha!
The Larger Problem is that the World is running out of Cheap / Lite Sweet Crude Reserves..
NOW! there is a LOT! of Oil out there.. sour crude, deep water crude.. but the sweet lite crude that people can afford.. the sub $100 a barrel oil.. to maintain $4.00 or less a gallon Gasoline.. is running out.. to the tune of 4 million barrels a day! or 5% a year..
Deep water crude.. like in the Gulf of Mexico.. is 5 miles under the sea floor.. which is 10,000 feet beneath the water line. This oil cost more than the oil that is 100 feet underneath the desert and 3 miles from a deep water port.. in a country that does NOT! have an EPA.
watch this video.. catch up before you get run over!
http://www.youtube.com/watch?v=wYuLjGQQ-jg
The Business of Climate Change Conference 2009
I don't know why you got junked. That video made a lot of sense. In fact, I think I might be converted.
Oh well, we can always put a plutonium rod in our carengines.
JUST IMAGINE HOW A CAR CRASH WOULD LOOK LIKE!
Traffic information will be so much more informative also:
2 cars have crashed into each other on the highway, therefore the police has ordered a evacuation zone of 500 miles around the site. Please take your jodium pills again.
Also 7 mushooms where seen in the center of the city. Sofar, we haven't heard any signs of life but we'll keep on sending in smucks untill we do get some news.
Now the weather report...
Taibbi article from a couple of days ago:
Wikileaks: Speculators Helped Cause Oil Bubble (link below)http://www.rollingstone.com/politics/blogs/taibblog/wikileaks-cables-sho...
And then Taibbi reverts back to a shameless Progressive who ignores the obvious facts about their dear ideologues. Doesn't that mimic the behavior of a beaten wife who won't leave an abusive relationship.
Thanks for posting that article site, I was just about to do the same, navy62802!
But it's really about boxes within boxes within financial boxes.
After all, who owns the principal exchange all that speculation was done on (ICE Futures)?
Goldman Sachs, Morgan Stanley, BP, Royal Dutch/Shell, Deutsche Bank, et al.
But then, the bank/oil cartel owns all the exchanges and clearinghouses.
But who owns the oil companies? Bank of America appears, through it's various ownership and by extension, to be the majority shareholder in BP.
In fact, the banks and oil companies, pharmaceuticals and munitions companies (defense contractors in Americanese) are owned by the same small group of senior capital holders, so they work in close conjunction in the overall manipulation of this stuff.
JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, BofA, ExxonMobil, BP and the rest --- but really the gang of only a few.
Of course this "gang of only a few" would have ceased to exist, but for the Fed, the root of evil.
Where are all the big-mouth patriots here?
That's your target ... right there! Show me what you got!
This is a patriot.
The gubermint failed him...but he moves on without them.
http://www.cnn.com/video/#/video/us/2011/05/26/natpkg.week.in.tornados.cnn?hpt=C2
Eric (Place) Holder will get right on it after nullifying the AZ illegal immigration law(s)...
Just called the TSA and they will get right "on" it
By that you mean Mr I will get a visit shortly, yes?