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Winners and Losers

Bruce Krasting's picture




 

I loved this story. Some poor bastard over at Chevron
accidentally released the company’s crude/distillate trading results for
the year. An effort was made by the company to squash the information.
Dow-Jones said, "the hell with that" and went public with the info.

Not surprisingly, Chevron is doing just fine in its oil trading business. They show year to date gains of a very tidy 360 million. I find it amusing that they are making such a bundle. The President said a month or so ago that he was going after the speculators
who he thinks are driving up the cost of energy. Look no further Mr.
President. It’s the oil companies that are driving up prices and making a
bundle in the process, not some ‘locals” who trade crude futures in NY.

Speaking of making a bundle in oil trading it’s worth taking another look at the SPR oil sales that Obama ordered to “reduce the price at the pump”. This chart looks at LLS (Louisiana Light Sweet) for the past month.

Note that as of Friday’s close of $116.49 we are now above the level for
pricing before the SPR sales (June 22). Therefore one would have to
conclude that nothing of lasting value was accomplished by the effort to
manipulate markets.

The government sold off 30 million barrels to the LLS market at the very
favorable price of 107.20. Comparing that to Friday’s close gets a loss
to the SPR of $280mm. Keep in mind that it only took a few weeks to get
these gains, so the folks who played in the deal made a bundle.

Given that sweet crude is now above where it was on June 22 we have to
anticipate that the deep thinkers in D.C. may well try another round of
oil sales. If they do, it will have the same results. Big Oil
will make a bundle, gas prices will not go down at the pump and the
‘owners’ of the SPR (all Americans) will get ripped off again.

There is the possibility that the bright folks who dream up these
silly plans will come to their senses. They might just do the ‘right thing’ and preserve the SPR for what it was supposed to be for in the first place; an emergency. I doubt that will be the case. Gas prices are going to be going up in the next few weeks. Given that the ‘Deciders’ have absolutely no other options (monetary and fiscal policy is now dead in the water) they may well take the step to manipulate energy prices again. It won’t work the next time either.

There is no way to determine how much money was made by the principals
who bought the SPR oil. We know what price they paid and we know how
much oil each company got. We don’t know when/if they sold it. On the
assumption that the inventory profits were all retained, the paper gains
would look like this:

What’s $280 million amongst ‘friends’? By they way, they don’t pay taxes on this crap either.

At some point someone in D.C. is going to defend the decision to sell crude reserves from the SPR. I can’t wait. This effort to manipulate the economy produced no meaningful results, other than to make some fat cats fatter.

 

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Sun, 07/17/2011 - 21:34 | 1465154 bigwavedave
bigwavedave's picture

crude futures are traded in new york dummy.

Sun, 07/17/2011 - 21:34 | 1465152 bigwavedave
bigwavedave's picture

crude futures are traded in new york dummy.

Sun, 07/17/2011 - 21:01 | 1465084 RagnarDanneskjold
RagnarDanneskjold's picture

You're missing the big picture. Why is Chevron trading oil? The dumdums in Washington, the press, and most of the general public only look to the seen and completely ignore the unseen. In China at least, the answer is more obvious as to why Chinese companies from every industry are forming real estate divisions, taking out general business loans, and using the capital to fund real estate development and speculation. I would argue it is really no different in the U.S. Easy money is going to go somewhere and it went into the financial and commodity markets. If you have an information advantage (as one would hope Chevron would), you can profit from this new gusher of Benjamins that is connected to a giant superfield known as the Federal Reserve. Why devote resources to risky exploration and drilling, when you can mop up in the financial market? This is why the real economy erodes during a credit bubble, people have an incentive to make money and they go where the money is. The jackasses chasing speculators might as well be Soviet planners decrying hoarding.

Sun, 07/17/2011 - 19:41 | 1464943 mind_imminst
mind_imminst's picture

360 million. I am not going to get my undies in a bundle. Is there a law against oil companies trading oil. If so, then there should be some legal action. Did they collude with other oil companies to get their trading profit? If so, then there should be some legal action. If not? Well, what is everyone so upset about. If you were in the oil producing/refining/selling business and could make a few pennies trading because of your superior knowledge, you would. I know that the oil companies do not have a "saintly" historybut if what they are doing is legal, then all I see are sour grapes.

Sun, 07/17/2011 - 19:42 | 1464945 mind_imminst
mind_imminst's picture

And don't lecture me about how the system is rigged. We all play within the system. It sucks, but we make do.

Sun, 07/17/2011 - 17:22 | 1464580 RockyRacoon
RockyRacoon's picture

How would Chevron's position and thereby profit not be part of the normal filings of a public corporation?   What I'm saying is, why would this not be public knowledge at some point?   And, bonus question for extra points:   How do we know the oil even left the original storage point?   Why could the entire exercise not have been a paper transaction all along.  (COMEX being a not-so-prime example.)

Sun, 07/17/2011 - 16:27 | 1464403 wang
wang's picture

Some poor bastard over at Chevron accidentally released

yes clearly an accident that just happens tie into the greedy bastard jet flying oil pigs meme

360m is chump change

back to the banksters and the billions they have taken from the taxpayers via Fed/Treas - oil and jets are a side show designed to distract

Sun, 07/17/2011 - 15:47 | 1464296 Sun Tsu
Sun Tsu's picture

Oil is black gold, neither electronic nor linen - 'nough said.  Get some.

Sun, 07/17/2011 - 14:10 | 1464040 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

BP = Barclay's Petroleum?

Sun, 07/17/2011 - 13:56 | 1463992 GoldmanSux
GoldmanSux's picture

Haha. Those well known refiners, JP Morgan and Barclay's, had their fat little snouts in this deal.

Sun, 07/17/2011 - 13:52 | 1463978 PTRio
PTRio's picture

The Obummer is a very intelligent person. That makes it very difficult to understand how stupid he is sometimes, and makes you wonder if his “stupid” move or moves aren’t actually by design.

 

For example, opening the US Strategic Oil Reserve and selling oil from it. He claims it was to bring down prices at the gas pump and hurt speculators who were driving up the price of oil. OK, fine by me. To the extent speculators drive up the price of oil they should get hurt. It isn’t fair. Oil is a national security level commodity which plays a vital role in the functioning and life of America and Americans. I support a ban of all speculative (non delivery) trading of oil and oil futures because that activity drains billions from the US economy and our citizens every year.

 

But, it struck me as awfully stupid to say he was trying to hurt speculators by selling the oil, WHEN HE SOLD IT TO SPECULATORS! JP Morgan bought what, over $200,000,000.00 in oil from the strategic reserve. Barclays Bank, a FOREIGN BANK bought 200,000 barrels. And what can a BANK possibly do with oil? Well, what the Goldman Sachs Vampire Squid Department does is they rent tankers to store the oil and anchor them offshore to wait for the price of oil to move higher, at which time they sell it to refiners at a nice profit and the cost of the SPECULATION and SPECULATOR PROFIT is then passed on to consumers…..just as if the oil came from Saudi Arabia and not from the US Strategic Oil Reserve.

 

Can the Obummer really be THAT stupid? Or, did he release the oil as a means of getting cheap oil into the hands of the major oil companies and Wall Street speculators so they could make some easy money? Because, as the article below points out, (and the “accidental” emailing of these figures to the press was no “oops”, believe me. Somebody with a conscience wanted the American people to know about this scam) oil speculators are definitely making big money on this oil. Making LOTS of money on the US Strategic Reserve Oil. Even the oil companies themselves are speculating and making money in this oil. Duh.

 

I have to believe Obummer knew what he was doing, and literally gave roughly $200,000,000.00 in profits (and likely a whole lot more) to the oil companies and banks which bought this oil. After all, it is time to bring in those campaign donations. Obummer scratches the backs of the oil industry (and a few banks who act all put out so they are included) and they scratch his in the form of campaign donations. Corrupt? Illegal? Or just the new new reality of the Bankster Republic taking over?

Mon, 07/18/2011 - 04:45 | 1465631 Urban Redneck
Urban Redneck's picture

"I support a ban of all speculative (non delivery) trading of oil and oil futures"

The problem is-

Legitimate hedging of energy costs involves non delivery) trading of oil and oil futures.  

Therefore-

Enforce delivery, absent the creation of thousands of new product markets (where lack of market depth and liquidity alone lead to decreased hedging efficiency not to mention infinite new arbs for big speculators), and prices will significantly increase (kiss transitory inflation and $100 oil goodbye.

Sun, 07/17/2011 - 16:08 | 1464350 Libertarian777
Libertarian777's picture

how do you define 'intelligence'?

Bernake has a PhD from Princeton and is the most retarded person I know.

He could have a 180 IQ yet couldn't figure out the difference between real wealth and nominal paper fiat if a wad of FRNs hit him in the head repeatedly.

I won't even say he has Aspergers, that would be an insult to people with autism.

He suffers from delusions of grandeur.

Sun, 07/17/2011 - 13:41 | 1463952 Moe Howard
Moe Howard's picture

Oil companies are the big dogs. The big dogs make money no matter what happens. You will never see any form of  energy but oil until they have a controlling interest in the production and distribution of the new energy source. They will not allow it.

Sun, 07/17/2011 - 13:38 | 1463945 the grateful un...
the grateful unemployed's picture

no one wants to believe it , but the rise in oil prices (asset values) is the intended consequence of the SPR release. The Fed has to keep juggling asset prices, or it will end up buying them. (a mortgage contract and a contract to buy a barrel of crude are the same thing for their purposes)

Sun, 07/17/2011 - 13:12 | 1463866 PulauHantu29
PulauHantu29's picture

Anyone who does not own oil (USO) is not keeping up with inflation (unless they own alot of gold or silver).

Sun, 07/17/2011 - 13:53 | 1463982 knukles
knukles's picture

FYI, a similar vehicle with way superior longer term performance is DBO.

Sun, 07/17/2011 - 13:07 | 1463848 tom
tom's picture

It's as I've been saying, dopes like Taibbi have it all wrong, GS and JPM and the hedge funds are not the big swinging dicks of the oil futures markets, the oil companies are. The oil companies have most of the storage capacity and all of the refining capacity. Speculators who go up against them are very disadvantaged and will lose much more often than win. Besides, GS and JPM and the like aren't even doing much speculating, they're mostly just leading the lambs to slaughter and collecting their commission.

Sun, 07/17/2011 - 13:39 | 1463947 FeralSerf
FeralSerf's picture

BP is a major asset of the British Empire, like the East India and Hudson Bay Companies use to be.

The sun never sets on the British Empire. The American military is one of their enforcers.

The British Empire is owned by the Rothschilds. (Debt is slavery, even if you're the King.)

Sun, 07/17/2011 - 13:42 | 1463953 Moe Howard
Moe Howard's picture

+666 Exactly.

Sun, 07/17/2011 - 13:40 | 1463938 FeralSerf
FeralSerf's picture

.

Sun, 07/17/2011 - 14:40 | 1464106 hooligan2009
hooligan2009's picture

think you will find that ever since BP bought the American Oil Company (Amoco) plus a few other deals, that the American fund manager owns almost 10%. This from a British paper last year for the top ten shareholders.

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7802978...

you can check out the board here as well:

http://www.bp.com/managedlistingsection.do?categoryId=9021626&contentId=...

Sun, 07/17/2011 - 13:02 | 1463844 malikai
malikai's picture

I hope they do. I'm waiting in earnest to ride the waves they make. Seriously Bruce, if you can't beat em.. ()

Sun, 07/17/2011 - 13:01 | 1463839 LMAO
LMAO's picture

Yes Bruce, it's a win win situation according to Goldman Shyte:

Higher oil-prices = more petro-$$ running back into the US economy

But then again, if somebody is win-winning in this trade, it kinda implies somebody else is lose-losing.

LMAO

Sun, 07/17/2011 - 13:27 | 1463916 FeralSerf
FeralSerf's picture

Even (much) more important, higher oil prices = many more paper dollars being exported that will not get back into the US economy.  When one can pay for real assets with just a wad of toilet paper that never puts demands on local goods and services (except the FIRE variety that's rapidly inflating, which is good if you're one of "Them"), then real interest rates can be more easily kept negative.  QE3, coming to a gas station near you!

Control of the planet's major energy sources, and nothing is more major than oil, is the prime method of control of everyone by the Power Elites.

The Big Wealth Transfer continues.

Sun, 07/17/2011 - 13:50 | 1463825 knukles
knukles's picture

And in any case, there are never any "speculators" taken to task. The campaign contributors just contribute more in order to preserve the status-quo. 

Sun, 07/17/2011 - 12:56 | 1463824 knukles
knukles's picture

But but btu btu but...
The oil company is not a speculator.  Neither is a hedge fund or private equity shop.

They make (As if it's all volitional in today's day and age... try cost of doing business, and tax deductible at that!)....

              .......campaign contributions.

Sun, 07/17/2011 - 12:49 | 1463800 ArmchairRevolut...
ArmchairRevolutionary's picture

Nice work Bruce!

Sun, 07/17/2011 - 12:46 | 1463781 Careless Whisper
Careless Whisper's picture

This effort to manipulate the economy produced no meaningful results, other than to make some fat cats fatter.


That was the intended meaningful result. Aren't you starting to get it?


Sun, 07/17/2011 - 13:49 | 1463970 drbill
drbill's picture

Bingo!

Understanding what's going on get a lot easier once you start asking, "cui bono?"

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