Oil

[ParkTwain]

Does it ever occur to any of the talking head pundits that the price of oil is building in a risk premium for the Iranians plinking a couple of tankers with their supersonic modified silkworms?

Well, one of the points I was trying to make earlier in this thread is, why isn't this occurring to our sabre-rattling President? I guess he must have some friends in the oil business.

[DSteckler]

<< Yeah, I'm interested as to who wants to be on the other side of a contract to deliver nonexistent oil. >>

They have no intention on delivering because they plan on closing out the contract prior to expiration. Do you think there is any speculator who intends on delivering the physical commodity?

[skiracer]

<< Yeah, I'm interested as to who wants to be on the other side of a contract to deliver nonexistent oil. >>

They have no intention on delivering because they plan on closing out the contract prior to expiration. Do you think there is any speculator who intends on delivering the physical commodity?

It's not my game an I'm no expert but I do agree wholeheartedly with Dave's take. They are buying and selling futures on oil that hasn't come out of the ground yet. No one is planning on taking physical possession of any of it except the refiners who eventually end up with it at the prices based on the futures contracts or hedges that were contracted months and years beforehand. To think that there aren't huge money interests that are manipulating it is naive. It boils down to being in the loop and knowing where the smart money is flowing and when to flow with it as it changes sides.

[mrmarket]

It's not my game an I'm no expert but I do agree wholeheartedly with Dave's take. They are buying and selling futures on oil that hasn't come out of the ground yet. No one is planning on taking physical possession of any of it except the refiners who eventually end up with it at the prices based on the futures contracts or hedges that were contracted months and years beforehand. To think that there aren't huge money interests that are manipulating it is naive. It boils down to being in the loop and knowing where the smart money is flowing and when to flow with it as it changes sides.

Think of it this way...if you think oil is going to be very very expensive 2 years from now, why shouldn't you be able to buy it now, for future delivery, and lock in your price?

Some may call it speculating..some may call it hedging..but the MARKET is what is determining the price of oil. It's working the way it is supposed to work.

[New-born baby]

Huge

Think of it this way...if you think oil is going to be very very expensive 2 years from now, why shouldn't you be able to buy it now, for future delivery, and lock in your price?

Some may call it speculating..some may call it hedging..but the MARKET is what is determining the price of oil. It's working the way it is supposed to work.

Bravo, MM! Right on the money!

[ParkTwain]

No, no, the "nonexistent oil" I'm talking about is the number of barrels of oil referenced in future contracts for delivery next month that are in excess of the aggregate number of barrels of oils that can physically be delivered next month. The inherently speculative contracts that will never be exercised. I can understand that these contracts will be created and traded and allowed to expire unexercised. But the fact that there is such a vigorous trade in these contracts that it has pushed the spot price of crude oil up with such alacrity comes down to an indictment of the exceedingly poor diplomatic skills of our President. He is willing to distort our economy via overheated oil and gasoline prices (resulting from speculative trading of oil future contracts at the NYMEX) as a result of his inability to manage relations with other nations who are oil producers but also have other aspirations and national interests. If he doesn't understand that one indicator in the "free" markets of his skills at managing international relations between the U.S. and the world's oil producers, especially those in the Middle East, is reflected in the inherently speculative activities that happen daily at the NYMEX, then he is profoundly incompetent as President and actually dangerous to the U.S. economy.

We are the superpower, not Iran, not Venezuela. But it is the U.S. President whose words are distorting the international markets and the speculative price of oil. And this is directly and immediately hurting our domestic economy. The President is doing this. Remember this chart I posted earlier in this thread:

http://inflationdata.com/Inflation/images/charts/Oil/Historical_Oil_Prices_Chart.htm

The brisk rise in oil prices coincides with the advent of the Bush presidency.

I have now come to believe that the "risk premium" that is daily being priced into the NYMEX oil futures contracts is actually the "Bush risk premium" not the "Iran risk premium."

[mrmarket]

No, no, the "nonexistent oil" I'm talking about is the number of barrels of oil referenced in future contracts for delivery next month that are in excess of the aggregate number of barrels of oils that can physically be delivered next month. The inherently speculative contracts that will never be exercised. I can understand that these contracts will be created and traded and allowed to expire unexercised. But the fact that there is such a vigorous trade in these contracts that it has pushed the spot price of crude oil up with such alacrity comes down to an indictment of the exceedingly poor diplomatic skills of our President. He is willing to distort our economy via overheated oil and gasoline prices (resulting from speculative trading of oil future contracts at the NYMEX) as a result of his inability to manage relations with other nations who are oil producers but also have other aspirations and national interests. We are the superpower, not Iran, not Venezuela. But it is the U.S. President whose words are distorting the international markets and the speculative price of oil. And this is directly and immediately hurting our domestic economy. The President is doing this.

Incorrect...the contracts cannot be allowed to expire unexercised. Someone must sell out of their positions before delivery date, otherwise they'll need to deliver 1,000 barrels of oil for each contract. Similarly one would have to cover his short position lest he be forced to deliver 1,000 barrels on the NYMEX.

Anyone can buy or sell oil on the NYMEX. By taking a position, a futures trader is speculating on the price of oil. What's wrong with that? Don't we all speculate on the price of stocks?

[ParkTwain]

But Steckler says it is standard practice that the aggregate amount of oil being controlled for a given delivery period can greatly exceed the factual amount of oil that actually exists (such as for delivery next month) for export and delivery in that delivery period. I am most interested in the closest delivery period. One of you is not correct.

Ernie, do you know who sets the figure of how many total barrels of oil are controlled by the aggregate of all written futures contract for a given delivery period? (That is, is there a maximum number of contracts that are allowed to be created for a given delivery period? This is most important, practically speaking, for the closest delivery period(s).) Is it the NYMEX? Is it bounded on some basis, or is it unbounded and determined only by market demand for trade in the contracts? If what you say it true, then this figure *is* bounded, and I am wondering what is the basis for setting that bound.

[mrmarket]

But Steckler says it is standard practice that the aggregate amount of oil being controlled for a given delivery period can greatly exceed the factual amount of oil that actually exists (such as for delivery next month) for export and delivery in that delivery period. I am most interested in the closest delivery period. One of you is not correct.

Ernie, do you know who sets the figure of how many total barrels of oil are controlled by the aggregate of all written futures contract for a given delivery period? (That is, is there a maximum number of contracts that are allowed to be created for a given delivery period? This is most important, practically speaking, for the closest delivery period(s).) Is it the NYMEX? Is it bounded on some basis, or is it unbounded and determined only by market demand for trade in the contracts? If what you say it true, then this figure *is* bounded, and I am wondering what is the basis for setting that bound.

The open interest almost always exceeds the actual amount delivered, but the excess open interest gets closed out before the delivery date. For example...suppose next month's contract is presently trading at $70/bbl. I think prices are going higher. So I buy 10 contracts at $70. Next week the price goes to $72, so I sell my 10 contracts. By selling my position, I never have to take delivery of the oil when the contract expires....got it? Now suppose everyone on the planet does the same thing I did. This creates a lot of open interest. If there are more people who are bullish on the price, the price will go up as more "buy" contracts are entered.

The NYMEX controls the delivery of the activity. The actual trading is done on the floor of the NYMEX. The the only limit you have is the number traders who want to take the opposite side of your position.

I spent many years liquidating NYMEX contracts for heating oil and gasoline. I know what I'm talking about here.

[Lyehopper]

East African people also like those type of goats and I don't think they are necessarily Muslim. They say they like the chewiness.

I've sold goats to Jamaicans too. They didn't care about testicles and they kill the goat before they put it in the car to take it home. I've heard that Jamaicans cook up some pretty good goat.... The Muslims hog tie it and put it in the trunk alive.lol

[IIC]

No, no, the "nonexistent oil" I'm talking about is the number of barrels of oil referenced in future contracts for delivery next month that are in excess of the aggregate number of barrels of oils that can physically be delivered next month. The inherently speculative contracts that will never be exercised. I can understand that these contracts will be created and traded and allowed to expire unexercised. But the fact that there is such a vigorous trade in these contracts that it has pushed the spot price of crude oil up with such alacrity comes down to an indictment of the exceedingly poor diplomatic skills of our President. He is willing to distort our economy via overheated oil and gasoline prices (resulting from speculative trading of oil future contracts at the NYMEX) as a result of his inability to manage relations with other nations who are oil producers but also have other aspirations and national interests. If he doesn't understand that one indicator in the "free" markets of his skills at managing international relations between the U.S. and the world's oil producers, especially those in the Middle East, is reflected in the inherently speculative activities that happen daily at the NYMEX, then he is profoundly incompetent as President and actually dangerous to the U.S. economy.

We are the superpower, not Iran, not Venezuela. But it is the U.S. President whose words are distorting the international markets and the speculative price of oil. And this is directly and immediately hurting our domestic economy. The President is doing this. Remember this chart I posted earlier in this thread:

http://inflationdata.com/Inflation/images/charts/Oil/Historical_Oil_Prices_Chart.htm

The brisk rise in oil prices coincides with the advent of the Bush presidency.

I have now come to believe that the "risk premium" that is daily being priced into the NYMEX oil futures contracts is actually the "Bush risk premium" not the "Iran risk premium."

Bush this Bush that...Clinton this Clinton that...No matter...In the USA the top politicians are figureheads(Puppets)...I'll bet that you never heard of the names of those that really run things...They are behind the scenes outta the public eye...And NO I won't tell you their names...Because I don't know them...Politics is a game...A marketing strategy for public opinion...IIC

[Lyehopper]

Bush this Bush that...Clinton this Clinton that...No matter...In the USA the top politicians are figureheads(Puppets)...I'll bet that you never heard of the names of those that really run things...They are behind the scenes outta the public eye...And NO I won't tell you their names...Because I don't know them...Politics is a game...A marketing strategy for public opinion...IIC

The inner circle is in control....

[lemonjello]

Spillin the beanz

Ok. You guys have figured it out.

As a 99th degree Stonecutter I confess we control the supply of oil by SPECULATION in the futures market, fix presidential elections, communicate with the space people and secretly run the CIA for our own purposes.

A few months ago we cornered the market on Devil Dogs and Tasty Kakes. Expect us to increase the prices until only the rich can afford a delicious Tasty Kake.

Now sing with me -
------
The Stonecutter Song

Who controls the British Crown?
Who keeps the metric system down?
We do, we do.
Who keeps Atlantis off the maps?
Who keeps the Martians under wraps?
We do, we do.
Who holds back the electric car?
Who makes Steve Guttenberg a star?
We do, we do.
Who robs cave fish of their sight?
Who rigs every Oscar night?
We do, we do!

[DSteckler]

<< I can understand that these contracts will be created and traded and allowed to expire unexercised. >>

The long contracts are closed (sold) prior to expiration. They do not expire.

[DSteckler]

From the current issue of Fortune magazine

$3-a-gallon gas: Blame Washington, not Big Oil

http://money.cnn.com/magazines/fortune/fortune_archive/2006/05/15/8376854/index.htm