Rogue trader sends oil to year-high on $10m gamble

business.timesonline.co.uk...



First off what does it say about how our system works if one man, one trader can take our oil up to yearly highs at his free will? Also what does it mean by he wasnt given "permission" to do so? Do banks collude to send commodity prices to a certain level? I thought supply and demand did this. If not then what does it say about when oil hit $150 a barrel? Was that just the banks sticking it to the people? Will someone calm me down because this story really ticks me off....

reply to post by tjeffersonsghost

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Two main factors directly effecting oil:

Dollar strength.

Speculators.

I find it hilarious one man lost $10m and spiked oil across the World though.. ahh ... to have such power. If you're gunna quit, or want to be fired, that's the way to do it!

Personally, it's my belief that if you don't refine oil. If you don't make something with the oil. If you are not directly using the oil. Then you have no right to buy the oil. That would make it illegal for banks, funds, speculators, etc etc etc to raise or decrease the cost of oil, stabilizing prices and directly linking it to supply and demand.

After all. If you're buying mass quantities of oil and you don't use it in industry.. you're only doing such a thing to fluctuate prices and make a quick buck. If you ask me, the corporate taxes on citizens all over the World.

And to think... 2 years ago at the peak of oil prices, the trading companies claimed that the commodities markets weren't subject to manipulation via speculators. What a bunch of BS!

If 1 guy with $10M can do it, imagine what a brokerage house with $10B can do to a market. More proof that this whole thing is simply another sham deisgned to skim wealth off the working class and redistribute it to the top 1%.

I totally agree. If you cant take delivery then dont bid on it...

Or would yo u rather have the oil cartel themselves set the prices?

Supply and Demand no longer dictate the price of anything anymore. Wall Street created the ability to manipulate prices of physical commodities without actually having the physical part complete.

You need speculators for liquidity in the marketplace.

Everyone plays an important part.

I am guessing this person did this during a time of low liquidity and immediately got eaten up.

If you didn't have speculators in the marketplace the whole market would not be a very good place. Single moves could send the price going up or down very hard and then the people that this was "meant for" get totally screwed. Also, you dont need to take delivery if you are hedging against 300,000,000 barrels that you already bought.

reply to post by GreenBicMan

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You don't need liquidity if you don't allow speculation in oil. Food and energy should be hands off for futures traders, let them speculate on metals or coffee and other non-essential items. There's a pretty good argument that the real estate collapse and banking crisis was kicked off by the huge run up in oil and food prices last year, forcing low income Americans into default. Demand for oil has only dropped a few points since 2008 but the price dived around 80% at one point when all the traders ran for the exit.

It's not right that prices can be manipulated like that, every person on the planet is effected by food and energy costs.

reply to post by mythatsabigprobe

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My thoughts exactly. And I am in 100% agreement that rising food/oil costs certainly pushed American's over the edge.. the falling Dollar as a whole chipped away at us since the Dotcom bust, but the speculating was the final shot that did us in.

Everybody knows oil prices are a big scam. It's control by the elite that's how they make their billions double by manipulating the prices, same thing with stocks. Oil is abundant, there is no such thing as peek oil. US has vast amount of untapped oil fields that are classified. And no they are not saving it for the future because if we drill now it will last for hundreds of years and I'm sure in the future we won't have a use for oil. So what's the point of saving it? Think about it.


[edit on 4-7-2009 by amfirst]

exactly how PATHETIC and SPINELESS are REGULATORS........i guess it's the system but it gives you some insight......when you think critically and calmly about this and then reach the logical conclusion.....it is tuff not to scream Regulate or just shake your head and say where does this all end.

Dollar and Speculators ......Me and Rockpuck see eye to eye on this one.....and you know what the SICKER thing is ......dollar "strength" and speculator impulses are not just tied to OIL they are tied to various Food "futures" prices......soybean....corn......sugar.....etc.etc.etc...

the bank lobbyists and their cronies pay hand over fist to ensure that THEIR last line of ALPHA profits are not regulated..........i wonder last summer who pulled the plug on the Oil speculation game......people weren't exactly protesting thru the streets.....they just took it for the most part......what i wonder is who said enough is enough or was it they just exhaused all the excess capital that they had........did the forex traders get more dollar bullish and spook the commodity speculators....i wonder about this



[edit on 4-7-2009 by cpdaman]

reply to post by mythatsabigprobe

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You are incorrect.

You have no idea what happens in a "thin market"

Try trading the $25 Big Dow and see where you get filled because of no liquidity.


EDIT:

Also, I don't think it says, but this guy just got executed much higher than the ask and his order got swallowed up and the market moved back to equilibrium levels, so he didn't even really move the market, it came back right away..

Its the same thing as me entering an order for 100,000 ES Contracts at 3 points higher than the ask... it would move the market that instant, than most likely get swallowed up and the market would move back to an equilibrium level.

Some of you are worse than the same person you are criticizing all the time (Obama)

[edit on 4-7-2009 by GreenBicMan]

GBM just so i understand where you stand

do you agree with the way that the energy and Food futures markets are regulated...... regarding their ability to see dramatic inflows of money drive up the prices of things that people need everyday...people who buy on margin...and use leverage like this....and drive these prices up in the name of "wall street capitalism".....not because they need these commodities

[edit on 4-7-2009 by cpdaman]

reply to post by tjeffersonsghost

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Hi TJG...long time. You can see the "rogue traders" handiwork on the chart (one-day spike) , but who/what was responsible for the consistent run-up since Jan ? How bout the run-up in WTI , was the "rogue" also dabbling in West Texas Intermediate contracts ?

I think I know the answer

Not sure if folks understand that they are calling for the abolishment of the commodities futures market. Specs provide price discovery , price equilibrium , liquidity , and assume risk on behalf of producers/consumers...without speculators there would be no futures market. What the CFTC needs to do is enforce existing regulations , especially with regard to contract limits. Last year regulators were asleep at the wheel while several large specs entered the market masquerading as hedgers.

Then there was the 2.4 billion blow-up of oil giant Semgroup , covering shorts on 50 million bbls. The "let's hang the spec's" crowd was a little chagrined to discover that it was actually hedger Semgroup betting against a rise in price that helped fuel the spike to $147 oil last year.

Specs are integral , indispensable...no new regs...no price caps...just do the job you're paid to do for a change , and enforce existing.

FWIW , the only commodity currently under a trading ban is the onion.

Let's see....

What onions teach us about oil prices


GL


[edit on 4-7-2009 by OBE1]

reply to post by cpdaman

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The futures market is better regulated than the equities market.

Although there is dark liquidity, there is plenty of volume in most future's contracts to keep them somewhat liquid. In thinly traded markets like I have listed above, it is terrible to trade.

If we were to do this with oil, we would see gas prices surge one day, drop another etc.. over and over and over..

As the previous poster said, we need the added liquidity for this reason among others.

IMO and Im sure many others, if we took away spec. it would make the prices much worse and no better at all.

reply to post by tjeffersonsghost

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The reason a $10million bet can have that sort of effect is that many firms allow anywhere from 100-300 times leverage in the futures markets.

So if this guy risked $10million, he could have been trading up to $30billion in futures contracts. Doubtful since that would have raised a huge flag. But a couple billion wouldn't raise too much of a stir. But, the way it works is if they use the leverage, they can only decline by as much put up before they are 100% wiped out. So if he did 100 to 1 leverage and was trading $1billion dollars, a 1% decline in oil futures would wipe 100% of the bet out.