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Oil Market Manipulation Reaches Absurd Levels
By EconMatters
Markets & Manipulation: A long History
Most markets these days are manipulated to some extent, and this is nothing new if we look back through the history of financial markets. But there are some strange things happening right now in the oil market worth mentioning.
Brent-WTI Spread/Scam
Another scam in the Oil market is the Brent-WTI spread this has been one of the biggest scams over the years in the Oil market. Just to provide some data to the absurdity which is this much hyped about nonsensical spread Cushing Oklahoma has 49.7 million barrels in storage, it had 45.1 million barrels in storage a year ago. Cushing had 50 million barrels in storage at the start of the year. Moreover, in June Cushing will be adding additional supplies to storage due to current pipeline capacity going offline. So for all this talk about pipelines finally unlocking all the glut of oil supplies from the Cushing hub, and this being the reason for the impressive reduction in the Brent-WTI spread it is just a bunch of nonsense.
Cushing Oklahoma Supply Glut
So there is basically more oil trapped in Cushing Oklahoma then there has ever been when the spread was 25! So regardless if the spread is 25 or 8 it has very little to do with supplies residing in Cushing Oklahoma that is quite evident. Now there are a bunch of factors contributing to the nuances of the spread which I will not go into detail here but the takeaway is just to point out the absurdity which is the false and misleading rhetoric that encompasses this spread and Cushing Inventory levels.
400 Million Barrels & Climbing
While we are talking about inventory levels it is funny that WTI sits at $97 a barrel when the entire year we have had basically 3 minuscule draws in inventory supplies which stand at a record breaking 395 Million Barrels in storage. So the Dow keeps hitting new highs every week, and the US keeps setting new modern records for Oil in storage each week.
Weak Demand in an Artificial Economy
But it is not just the supply issues in an obviously oversupplied oil market with the US domestic production being the biggest culprit. The demand side of the equation has been equally bearish for the fundamentals with China`s actual economy slowing over the past 2 years, Europe being stuck in a perpetual recession, and the US being a mature market with higher fuel standards and a stagnant economy that requires $85 Billion of stimulus each month to keep from cratering. The demand side had been very underwhelming from the products side of the equation. For example, Gasoline supplies in the northeast are 10% higher than normal for this time of year.
Strong Dollar Bearish for Dollar Denominated Commodities
Finally the strong dollar is supposed to be bearish for commodities and oil, and with the US Dollar Index hovering around 84 and threatening to strengthen from these levels it is a wonder that the Oil market has barely noticed this strange occurrence in Dollar strength, unlike the Gold and Silver Markets.
Fundamentals: Are we talking about the Fundamentals Again?
The takeaway is that none of the actual fundamentals ever matter in the Oil markets. When you have a house style advantage that would make any Las Vegas Casino envious the fundamentals play little part in a manipulated Oil market. It is all about protecting the huge supply chain that is the oil market and everybody`s livelihood. When in doubt follow the money trail, and money is the biggest reason oil prices are where they are currently despite the bearish fundamentals of the commodity. Oil prices wouldn`t be at these levels if the powerful manipulators of the commodity were not making a whole lot of money as a result.
Oil Analysts Clueless
So the next time some Oil analyst tells you some hard studied reason why Oil prices are up it is all nonsense. Oil prices are up or down depending upon what the powerful players want oil to do, one week it can be at $86, the next $97, or $77, it is all about the money to these players, and they will do whatever it takes to make the money. And if it means being very creative with their methods then so be it, it is not like this is a regulated market!
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Brent has compressed because Europe's consumption is getting smashed.
All oil is not "oil". What comes out of the shales in the US is much more condensate than high energy crude. The word "oil" has had its definition contorted by circumstance. Not by conspiracy.
It used to be, for conventional fields, that "crude plus condensate" was a viable measure because in a conventional field the mix was 90:10 in favor of crude (the stuff with lots of BTUs per barrel). This was the measure norm.
It still is, but the Eagleford shale has been proven to have a mix of about 10:90, with light, thin condensate (more of a natural gas liquid than a crude) being predominant. This is normal for shales. They were supposed to be natural gas plays and "oil" was a byproduct. But because "oil" now pays the bills, it's called an "oil" field.
The API weighting mix of these liquids is somewhat definitive. If we measured in tons rather than barrels, this "glut of supply" would look significantly different.
Bottom line: Being awash in oil is not all that impressive if the oil is not the energy dense kind.
thanks, ive read that they actaully mixing the shale oil with the light sweet wti and trying to pass it off as light sweet lololololol. it like stompin on the coke with manitol and sell it as pure then telling you the shits your having is just a conspiracy.
another so called expert talking about the oil industry what the fuck this guy is clueless about the oil industry. do i have to explain the spread
Higher oil keeps arms flowing into Syria from the proxy suppliers in the ME ...
Keeps Saudi F-15s in practice while mollifying the growing tensions there ...
Keeps a brake on the BRICs.
Consumer shumer ... geo-politics.
Yes, there is a world outside and it is the essence of empires to manipulate that world.
The oil companies really don't want the dirty little secret out that actual fundamentals like supply and demand don't really exist for the most part. Sure, oil will rise on FEAR, such as when Iran threatens to disrupt traffic through the Straight of Hormuz, and this will be reflected in an immediate rise in the price of gasoline, but isn't based on supply and demand at all. Same with refinery shutdowns, for whatever reason. We will see a price spike, but we won't see a report of a refinery coming back on line and an equivalent price drop. The biggest hoax of all is telling Americas that increased oil production in the US means increased energy independence. All this means is increased oil exports which don't mean a goddamned thing to American consumers. Oil companies have bribed politicians to see that royalties are almost non-existent. When you talk about trillions of dollars per year, you can see why there is so little development of renewable energy, and so much propaganda as it relates to global warming.
Wow, absolute claptrap in an oil article here...
The oil at Cushing is a pimple on the ass of world oil demand...
How does current WTI compare to the marginal cost of a new barrel of production?
more clap than trap
cause cheap oil is gonorrhea
Indeed the record breaking 395 Million Barrels in storage is about 4 ½ days supply in the world’s oil markets.
Using words like hyped, nonsensical, scam, and absurd 30 times in your article doesn't make your point correct. You say, "Now there are a bunch of factors contributing to the nuances of the spread which I will not go into detail here ...". So ignoring all the facts that are counter to your point seemed like a good idea when you wrote this? I have yet to see a thorough, complete, and unbiased article from you on oil. Stick to other topics, this doesn't make the grade.
Storage life is longer than a twinkie...it doesn't spoil
so more like...a Big Mac?
You're not bitter, EconTatters; not at all.
LOL
Dude can't write for beans. What the hell is going on in the schools these days?
There is a glut of oil and gas, but there is also the bottleneck of the refineries. Most of the problem resides with our illegal alien POTUS who hates free markets. Check out the conspiracies in Washington and this makes more sense.
"Manipulated"? If the oil market is being "manipulated" that makes it the only market left that is not RIGGED. As for the "strong Dollar" dollar index has been in a range 74 to 88 since Jan 2009... 4 years dollar has been rangebound. It all makes perfect sense in the new normal.... Its all rigged, supply and demand are buried in the rubble.
I think the usual axis wanted another war in Syria this month and the oil prices reflect this (as well as the usual manipulations by the same crowd). Seems to me Putin may have thrown a wrench into those plans by moving some of the Russian fleet into the Med and telling Kerry/Netanyahu/Cameron/Moon (all of whom have been to Moscow this month) that he isn't going to let them bring the same freedom and democracy to Syria that they've delivered so successfully in Afghanistan/Iraq/Libya/Yemen. It will be interesting to see what happens now.
haven't seen you in a while...glad to see you back. if you can handle me of course. "they are moving oil by rail cars." this is how you must start your presentation. or "phuck you JP Morgan (the man)...my name is John D Rockefeller III." you can say that too. but clearly there is a PURPOSE to said "ridiculous inefficiency"...which obviously is...for some strange reason actually..."to get everyone get everyone to buy into a railroad in addition to the oil." we haven't move oil that way since the 1890's! hmmmm. "the question does arise as to whether or not i can actually refine oil on a rail car as well." actually that is possible...small quantities...but given the favorable tax treatment of capital "forever" then...heck...you could probably put a small scale chemical company in one of those things too. you'd have to do the math...and science...of course. this is MICRO econ...and they can MATTER very much.
this glut of oil is a thorn in the peak oil crowds rear end..an a signal of the true economy of the west..although a new war in the ME would rapidly correct the glut.
China and other BRICS, are buying supply in side deals. The current CL market plays as s pseudo price discovery mode. They like it up high just like equities so most everyone makes money and the consumer takes it in the ass.
THe laws of supply and demand are easily miffed with we will charge "as much as we can feasibly get for it", market method.
Ponzi always deserves more ponzi.
Exactly, everyone seems so focused on "the west" or "America". Fucking morons, the BRICs really don't give a shit. With 7+ billion people (most of them not in "the west") all competing for a better quality of life there is plenty of demand for oil. The world will never see $50 oil again, especially once the dollar dies.
It is funny how people (like the author) think that this stuff behaves like any other, that the world, which grows exponentially every second, isn't all addicted, or that "stockpiles" somehow negate geological reality.
While the world can pay 80+ for a barrel why should oil companies charge any less? We'll see cheap oil when economic growth becomes a national issue (for any value of "national"). A light version of a command economy in other words.
It will happen once we get past the internationalist view of today's world "leaders".
"We'll see cheap oil when economic growth becomes a national issue"...I think we'll be waiting a while in ol 'merica.
Your gas consumption is subsidized by the DOD, hug a soldier, kiss a sailor, next time you see one, then drive three blocks to get that pack of Marlboros. USA, USA. There's one brance of Govt (DOD) that pays you back folks, and it ain't your politician.
Amen, bro! If folks realized how true that is, they would be hugging those guys. My son is one of them. In Afghanistan - been taking in-coming nearly every day. It is a war - and some are dying. I pray for his safety every day. Our servicemen & women are truly some of America's finest.