Fake-Out Thursday – Oil Scam Continues Unabated

ilene's picture

Phil explains how the oil markets are a colossal scam, once again enriching the big bankers and energy sellers at the expense of everyone else.  And of course, our propaganda machine mainstream media is making matters worse rather than engaging in objective reporting. - Ilene

Fake-Out Thursday – Oil Scam Continues Unabated

By Phil of Phil's Stock World

What a joke the oil market is!

First of all, the NYMEX contracts for January delivery close on Tuesday and there are still 132,168 open contracts or 1,000 barrels each (132M) scheduled for delivery to Cushing, OK, a facility that can handle at most, 45Mb of crude and is, at the moment, full.  The price of those barrels surged from $86.82 all the way back to our shorting target of $89 yesterday, where we once again had a nice ride down.  Now, in pre markets, it is back over $89 again and we'll short it again so I'm not complaining about the action but I am upset that this blatant rip-off of the American consumer can go on right under our "leadership's" noses.  

Logic alone dictates that if 132M barrels are on order for delivery to a storage facility that can only handle 45M barrels that the orders are mostly bogus.  You can track the open interest every day right here so don't take my word for it, watch what happens over the next few days as the people who are currently pretending to demand oil in January, roll their contracts to pretend demand for February (already at a ridiculous 268M barrels), March (172Mb) and April (60Mb).  Like the great Carnac, I will put the envelope to my head and predict that, by Tuesday, the January barrel count will fall to under 30,000 contracts, while the new front three months will rise by close to 100,000 contacts.  

This is scam #1 in the energy market and it goes on every month since the "Commodity Futures Modernization Act" of 2000 made it possible for thieves to run the energy markets with virtually no regulations. I've been speaking out on this for years and just this weekend, the NYTimes picked up the ball I tossed up over a year ago (better late than never!), when I pointed out that the Global oil scam was costing us 50 times more than the Madoff scandal EVERY YEAR!  We're not going to go into all that again as I want to highlight scam #2 in the energy markets and that is the weekly manipulation of the oil inventory reports.  

Florida GOP Lawmakers Live For Big Oil ImageYesterday, Criminal Narrators Boosting Crude were very excited to report that we had a 9.9Mb draw in oil inventories.  WOW!  That sounds like a lot of oil demand doesn't it?  Of course, any real news people would mention that the report clearly indicated that "U.S. crude oil imports averaged 7.7 million barrels per day last week, down by 1.4 million barrels per day from the previous week" but CNBC is not news, is it? As I pointed out two weeks ago today, they are nothing more than PROPAGANDA as a station owned by a company that makes a good portion of it's income selling energy-related products and makes much more money when oil prices are high than when they are low.  1.4M barrels a day times 7 days is 9.8 Million barrels that the US was shorted in order to keep the price of oil high - WHY IS NO ONE BEING ARRESTED?!? 

It's not just American Citizens who are paying the extra $60M per day that the $3 pop in oil costs us, the rest of the World consumes another 70M barrels a day and they are stuck with a $210M per day bill as well for each $3 gain in price.  And that, of course, is before the refining mark-ups.  Just the $270M a day they screwed us out of this week is a very nice $98.5Bn annual rip-off of the global population or, what I pointed out last year is a Double Madoff!  

Now consider that the real price of oil, when measured as global output vs. global demand on a historic basis should be closer to $60 a barrel than $90 and you have a TRILLION DOLLAR annual scam going on and our joke of a government does NOTHING to prevent it. Oh wait, I'm sorry, they do something, they accept massive campaign contributions from the Energy industry to block any legislation meant to put a stop to this on-going crime.  Perhaps if it were "just" a Trillion Dollars that was being stolen we could just laugh it off and accept it but the artificially inflated price of oil impacts food and many other products plus, as I mentioned, the refining mark-up alone almost doubles the net cost to consumers so, Globally, we're paying close to $5Tn in inflated prices just so the Energy Cartel can screw us out of $1Tn. It would be much cheaper to just hand them the cash in exchange for charging a fair price for the oil, wouldn't it?  

By the way, I apologize to my Republican friends for the above cartoon - the Democrats have had two years to do something about this and have proven themselves to be just as big a bunch of sleazeballs as the Republican's ever were.  How's that for fair and balanced.  This is a GLOBAL problem and it's obviously not going to be fixed by the voters or the people in power so I'm going to reach out to the business community.  

The Global Corporations who do not sell energy products who are also suffering as $5Tn of consumer money is being diverted away from their companies in order for consumers to overpay for food, energy and other related products.  That's 10% of global GDP that could be spent on assets, rather than going up in smoke every year! The non-energy companies need to get their own lobby together - one that calls for oversight and regulation of this industry and they'd better do it soon as our friends at Goldman Sachs are already pimping for the next $5Tn rise in energy-related spending as they raise their forecasts over the $100 per barrel mark - something that will, once again, collapse the global economy while Lloyd and Co line their pockets with record bonuses and Government bail-outs.  

Meanwhile, has anyone noticed that the Hang Seng has dropped 800 points in 2 days?  I know that doesn't fit into the Global growth narrative the MSM is shoving down our throats but surely someone is paying attention to China's rapidly declining market?  Things were looking so bad this morning that Goldman Sachs tried to manipulate the market by announcing a new China-based hedge fund (2:30 am) and then the S&P jumped in at 3am and hiked China's credit rating which halted the decline for about a half hour but then they dropped another 100 points into the close.  

I like to play a game in the morning called "Let's see how long I can listen to CNBC and not hear a word about this" - it's lots of fun as you watch them tap-dance around mentioning any news that goes against their narrative and China falling is a big one for them to ignore but, so far today, they are batting 1,000!  

Copper is also in it's 3rd consecutive day of decline as expanding Global inventories can no longer be swept under the rug.  7,050 tons of copper made their way onto LME inventory yesterday and now there are 357,950 tons in storage as it appears that Shanghai is once again reaching their storage limit of 200,000 tons.  We shorted FCX in Monday's Member Chat, so a little disclosure here but it's nice to see we seem to have caught that wave.  

Nonetheless, commodity assets have expanded to a record $345Bn as of the end of November, led by index-led investments.  In other words, the relentless targeted manipulation of the markets in this low-volume rally has gotten index funds to push heavily into commodities.  This allows the Goldman's of the World to turn ordinary 401K investors into commodity bag-holders right at the top of the market while retail investors are also drawn in, plopping another $6.1Bn into ETFs, a 10% increase in a single month!

We have all heard that China is having inflation issues and we've all heard that the PBOC will be hiking rates next year to combat it and we all know that the average Chinese worker makes $2,000 a year yet people continue to "invest" in the China/Commodity story as if we're at the beginning and not the end.  

While you are BUYBUYBUYing, keep in mind that Corporate Insiders are SELLSELLSELLing, at a pace not seen since 2007!  This, of course, comes as not surprise to Phil's Stock World readers, as we have a section called the "Insider Zone" that keeps us on top of what's going on inside Corporate America and you can click on that link and see lots of fun charts so I won't try to paint a picture here other than to say - Be careful out there!  

See also: Bankers Secretly Meeting to Destroy the World, Yawn...

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Djirk's picture

traders are driving up the cost of oil and holding down the cost of nat gas, meanwhile the western majors are selling oil assets to build LNG assets.....manipulation...ummm maybe?

I read another article on ZH saying there would be no market without liquidity provided by market makers and a robust derivatives market. I do not believe that is true. Markets functioned fine for centuries without leveraged market makers and derivs. I say put a stop to leveraged and speculative market trading and let the suppliers and demand work it out. Not to say producers could not access capital markets for reserve and inventories. 

Go ahead market "makers" and pawn my post to make yourselfs feel useful.

the grateful unemployed's picture

The Arabs have been complaining about the US commodity exchanges, which is a pricing mechanism, without the delivery capability, and is therefore a fraud. (we also use our SPR to create phony demand numbers) But if you can pad the demand, then you can hang on to some credibility (and hedge funds have bought oil for storage, taken it off the  market to help boost prices, anyone who does that must have a good idea that oil is undervalued). The weak dollar is the villain here, but Americans are not upset, that they are not paying a fair price for oil, or any other commodity. If you rip off some Arabs, so much the better. Rip off some farmers, some Chinese peasants, all to the good. Americans deserve 90% of the blame, for voting twice for Bush, and once for Obama, who will probably be reelected. We traded our integrity for a guaranteed standard of living. Nobody wants to be poor. We elect thieves for politicians and then act surprised when they are caught stealing. We all want an go go stock market, and plenty of booty under the Xmas tree, and we've sold our soles to keep it. Well you can't blame the guy who wants to send his kids to college, and buy his mother a cancer operation. Just the way it is. There is nothing fair about the way commodities are priced, and Americans who buy those products are just fine with that as long as they get the benefit..

rhyzimmer02's picture

Why they let garbage like this on the such a quality site is beyond me, its obvious that the author doesnt understand whats going on. 

Oil is expensive in $ terms but cheap to fairly valued in terms of gold and any other commodity.  Stop using the dollar as a measure of value across time, the world will make much more sense. 

In terms of peak oil, 2009 was the first year in 58 years that global oil demand actually fell.  The other 57 it rose, it will only take a few years of demand increase for oil prices to catch up with gold and the rest of the commodity complex

sandorgb's picture

nobody controls the oil market. the structure of the market is not efficient as such, but the key is balance of power. the more regulations piled up, the more capital will move to circumvent them. it is an endless game. if you really want to change the system, fund cold fusion research. it is the technology which can change the paradigm. if you think it's pie in the sky, do some rigorous research. since we don't even understand the hydrogen loading properties of platinum metals group, there's no scientific basis to dismiss cold fusion (LENR) out of hand. surprised this hasn't gained more traction in the oil discussion. even if it takes another 20 years to perfect in the lab it is worth the effort.

Sabibaby's picture

Actually OPEC controls the oil market more than you would think.

Gloomy's picture



   You miss the point. Commodites are the new money, since everything else is fiat. Since worries abound that TPTB will try to manipulate PM's, smart players are buying any and all hard assets in anticipation of the great sovreign debt crackup.

Cdad's picture


Like all the oil sitting around above ground and sitting on ships in the gulf is going to be what folk need most when the currency collapse kills business world wide.

In understand the argument but fail to see the economic sense in it.

Precious medals is what you are searching for...and it is a good thing I caught you.  They are on sale today!


Gloomy's picture

I'm 1/3 oil, 2/3 PMs. Hedge you bets.

lincolnsteffens's picture

Dearest Ilene and Phil,

If it were Valentine's Day I would send you an "I'm your Valentine card" 'cause you say such sweet things to me. XOXOXO smooch smooch

Ahhh the evil witch Maria is pumping heavy commodities as I write.

Sabibaby's picture

I’ll be the naive guy and ask -> Could the price be within $80-$90bbl in order to keep the price from spiking too high when crunch time does come over the summer? Maybe their building a cushion to soften the blow from extreme ups and downs of energy costs? At the same time contango could keep speculators at bay.

Drag Racer's picture

no, this is true manipulation at the core. Do some research of Rockefeller in the early years and during other critical times in history and you'll get an idea of how these crooks operate.

Just to give you an example look at the ozone layer. R12 freon was banned because they said it would destroy the ozone layer. This is a complete lie. I know because my family was the largest R12 supplier on the west coast of the US. The truth is R12 will not react naturally with O3 (ozone). Chlorine is the bad guy here. The chlorine put in swimming pools is 1000 times more damaging to O3. But did they mention that... no. Though don't worry about the pools destroying our sun shield as the amount of chlorine gas to reach the upper atmosphere is so small it is just a non player. Though, every time we send up a rocket or shuttle into space it creates quite a large temperary hole in the ozone layer due to the massive amount of chlorine release by the solid rocket boosters. Of course they forgot to mention that too.

The reason to blame R12 on the hole in the ozone layer, which is just caused by the sun reflecting energy off Greenlans ice sheet and is quite normal when the solar radiation exites and breaks up the O3 molecule, is the patent on R12 ran out and Dupont was going to loose their monopoly. So, they invent and of course patent R134A as the replacement to R12 while getting congress to mamdate the use of. Also, since Dupont and big oil are such good friends, R134A is much less efficient and uses more gas/oil to cool your car while stuck in traffic wasting even more gas. Did I mention they hold the patents on the new compressors needed, the change over/recycling equipment, and ownership of the recycling facilities that they paid congress to mandate.

Anyway, the point being is you just can not trust the MSM stories as most of the time they are manufactured lies to facilitate the monopologopolies... But hey, its just business, not personal...

Ferg .'s picture

I'm of the opinion that speculation in commodities integral to everyday life ( oil , wheat and other foodstuffs for example ) should either be severely curtailed or abolished entirely . That those on low income ( and in current circumstances those at the centre of the socio-economic chain) should have to divert  vast swaths of their funds simply to be able to function normally ( i.e to take in sufficient food and pay for fuel ) is deplorable . As a matter of principle I refuse to go long oil . I'm currently shorting the shit out of it . Of course as I'm just a lowly miniscule retail trader that means fuck all . Whatever about FX , equities and derivative securities , certain commodities should be sacrosanct and protected from the machinations and whims of a small clique of influential speculators .

Dollar Bill Hiccup's picture

I want to sell Chinese Peasant futures. Since those poor people are for all practical purposes slaves, and slaves are not people but things, and commodities are things that can be bought and sold based on forward delivery dates, why not? Yeah, I want to go short those little guys ...

We might as well add American Children contracts as well since with all of the debt that is being thrust upon them, they are effectively slaves as well. Short the little brats, they don't know how to suffer at all, but suffer they will.

kaiserhoff's picture

With the exception of PMs, no one should be "investing" in commodities.  They are better viewed as goods in process, and should be left to specialists and speculators, but why the biggotted cartoon?  How is this the Republicans fault when the Dims have a stranglehold.  Your perma-bias is showing.

jus_lite_reading's picture

I was a lifetime Republican. I can tell you, both sides are as guilty as anyone. Didn't want to see it when I was. Doesn't matter anymore. We had a good run. Now, let's sit back and watch as the greed comes back to explode in their faces. Game over. 1776-2010 RIP

Threeggg's picture

Great writeup.

I knew oil stocks had to be going through the roof because of the slowing economies around the world so less energy consumption.

Everyone keeps talking about peak oil but not that consumption has fell through the floor and every tanker, silo and oil storage facility is filled to the brim.


flattrader's picture

I had coffee with an oil/gas/energy trader last week who told me what was going to happen in the energy complex going forward would be stunning.

I reminded him that if they chose to pull that crap again the difference between now and 2008 was that 2+ years ago, people still had jobs and could pay for $3-$4+ a gal. gas.

They can run it up there again, but it won't stay there long as the so-called "economic recovery" comes to a screeching halt and people just stop driving anywhere uneccessary...and their tankers in the Gulf of Aden would continue to do donuts.

He seemed genuinely surprised that I thought such a series of events would happen.

I wonder where the hell people like this come from.

Vendetta's picture

Thanks.  I forgot about the pre-2008 manipulations that led to people in 41 countries rioting about food prices, it looks like the manipulators are turning the screws again as their greed consumes them and the politicians are paid for their blind eye.

flattrader's picture

Google: Vampire Squid Goldman Sachs

and you'll get a link to an eight page? Rolling Stone article by Matt Taibbi that will remind you what a insidious group of worthless bastards can do to ruin the lives of people world wide,

Cdad's picture

First of all, the NYMEX contracts for January delivery close on Tuesday and there are still 132,168 open contracts or 1,000 barrels each (132M)scheduled for delivery to Cushing, OK, a facility that can handle at most, 45Mb of crude and is, at the moment, full.


I just had to say that, when I read this in your article, I got all hot and bothered and wondered if I should go all...

"Hey, Ilene, what's your sign."  Or maybe, "So, if you gave me your number I could punch you into my ole' calculator and figure out the sum of our parts," if you know what I mean. 

But I'm not allowed to say such things to other women, so I thought I'd just say RIGHT ON!  Because the oil futures chart lately is one of the dumbest charts I have ever seen because...I know, I know... it has to be so that the OIH can hold up the Roach Motel [SPY].  We all have to do our part, I guess.

So too damn bad Average Joe...pony up at that pump, fool!

Rock on, Ilene!


Spitzer's picture


If people would rather hold oil then dollars then so be it. Its got nothing to do with consumable supply and demand, it has everything to do with being out of the dollar.

dussasr's picture

I'm not sure I see the scam either...  If "manipulation" ended and prices went to $60 - the author's fair value, then production would collapse, demand would rise and there would be an oil shortage that would drive the price right back up.  What gives?

max2205's picture

Thx. Didn't know I was getting the sausage from them too

Wall st has to go

pitz's picture

Why not talk about banker salaries that have been artificially manipulated upwards, even though there is little that a banker does, that could not be done by your average new college grad who would be happy to accept $100k/year instead of literally millions (hundreds of millions) per year.

This is the bigger story, than merely some producers of oil reaping a bit of a windfall. 

flattrader's picture

Bit of a windfall?

You really need to re-read the article.

The socially worthless bankers who are getting those huge salaries you object to are doing so BECAUSE of the massive fraud they've perpetrated on consumers via commodities market manipulation.

This is NOT reaping a BIT of a windfall.

Try reading this first


pitz's picture

BTW, if banker salaries weren't manipulated, then any alleged excess profit to the financial sector would flow to bank shareholders, not to employees or directors. 

pitz's picture

The prices aren't flowing to the oil producers who get to sell for $90/barrel instead of the $60/barrel that is allegedely a more appropriate price?


Just how are bankers making money off of this???  Other than being owners of oil stock, perhaps?

IBelieveInMagic's picture

Hey, be thankful that you are getting oil in exchange for some colored paper -- don't look a gift horse in the mouth...