Is a PPT-like or currency-type intervention a feasible option for oil?

Discussion in 'Trading' started by gangof4, May 8, 2008.

  1. gangof4


    looking at the last $1 move up this afternoon on dick for volume got me wondering whether a PPT (plunge protection team) type effort could take out some of the speculative excess in oil?

    looking for opinions as to whether this is a naive thought or... not...

    i understand supply and demand, elasticity of demand and all... but, like many, i feel the price of CL has a lot of speculative excess in it. given that the price is set in the market, and given what OPEC/ other oil exporters have to gain, it isn't exactly a stretch that they have efforts to manipulate the price to the upside by going long CL. the speculators are along for the ride and everyone long is happy.

    so... what if the OPIC (organization of oil importing countries) were to intervene with a few surprise brutal interventions that do some damage to CL longs to the point that the risk/reward equation shifts?

    i imagine such moves would have to fit into the same category as the PPT (ie: official denial it exists).

    ok... so rip apart (or not) my hypothesis)- just include why it wouldn't work to the point that a reasonable person would conclude that it's a faulty notion...
  2. cszulc


    All we need to do is raise rates by 100 basis points and have the Fed say, hey, we're wrong about inflation and that is what we need to worry about.

    The economic stimulus checks will be going directly to GAS! I walked home today (something I have been doing for 11 years as a way of exercise) and saw $4.02 a gallon on the nearest Shell station.

    Who cares about bailing about equity markets and homeowners? We can do that separately from just artificially lowering rates. Give a small tax rebate to homeowners or do some kind of market intervention and (dare I say it?) freeze some subprime interest rates.

    Rates should be where the ECB has them, between 3 and 4%. Sure stocks would go down, but as traders, who cares? Just trade it.

    The move in CL is parabolic, however I wouldn't go shorting it. I have an upside target of $128 here, and don't think we'll go much past it.
  3. gangof4



    nobody has an opinion on this?!?

    like i said- let me have it, call me an idiot, just lay out why...
  4. You know its a bubble when everyone (in power) ignores the elephant in the room. Half of the problem is no one of worthwhile contrary public influence even understands the structure of these markets. Tell me one thing: Isn't it funny how after oil price crossed a certain level (past 110 or so convincingly), suddenly Bush & company starting trumpeting this as a market in tight supply, and formally took the 'lets ask OPEC' stance? (As if to imply price was always set by fundamentals. That sure worked in pricing subprime bonds ... Ratings agencies sure knew the fundamentals, didn't they?)

    I can't find one bullish EIA report.

    If the US govt were smart, it would start flooding the market with SPR oil right now. I think selling 200 million barrels of oil on the open market, along with passing a 35mpg+ car buyer subsidy, would send an appropriate message. I'm sure our pension funds have a use for 200 million barrels of oil over $100.

    This is classic ...

    Fast forward 2 years from now and we'll be having hearings about how Goldman (or whoever... maybe ICE buyers) brought the oil market up on complete lack of fundamentals ... a la Enron energy crisis !

    Until then, there is no bubble and the free markets do a good job taking care of themselves!!!

    (PS: I wouldn't be saying this if this were a supply or demand side crunch, which this is clearly neither).
  5. LT701


    everyone is getting creamed so that some people can keep a house they couldnt afford in the first place
  6. gangof4


    i think the california enron energy crisis is a fair corollary.

    the bulls/media/etc talk BRIC/emerging markets demand- no argument from me. thing is, this isn't some new revelation. these economies didn't all of the sudden surprise us with their growth. the growth rate in China is actually slowing vs the average of the past 10 years.

    my point- this was all known 2 months ago, 2 years ago. it's not like the june 2008 CL contract was trading at 126.13 2 years ago. OPEC and the Saudi's tell the truth when they say there is excess capacity.

    so, why 126.13? because there is no real fear of being long and plenty of fear being short (trust me, my venture into oil shorting yesterday/today has kicked my ass in short order).

    again, i ask:

    why shouldn't the US govt. take the short side of the trade and stabilize the market? and, why wouldn't it work?...
  7. gangof4


    forgot to comment on this...

    problem with taping the SPR is that this would leave us more vulnerable to 1973 type supply disruption (i lived thru the odd/even rationing- we're hostage enough to these pricks (OPEC) already, without giving them an opening).

    it's 30 years too late, but the tree hugger slaves in congress need to grow a pair and lay out what everyone knows- we have lots of fucking oil off our shoreline, possibly enough to rival Saudi Arabia by some estimations- we need to fucking open it to drilling. the arguments are so lame- it's just caving to left wing hysteria- the same way they killed nuclear in this country. these idiots act as if oil comes to the US by helicopter- there have been many more tanker spills than production spills over the years- duh. funny, i wrote a 12 page paper about this back in high school- 1980. the premise was that we had become complacent since the 73 crisis, and that we needed to start now (1980) to secure energy independence for the future to avoid a repeat. if a 17 year old kid could see it, you'd think the 'powers that be' would have done the right thing and ignored left wing hysteria...
  8. This has everything to do with OPEC. They have set supply flat for the past 6 months. Oil demand in the world constantly rises over time, but usually OPEC increases output at a similar rate. Huge manipulation by the Monopoly. Also, remember the new futures exchange in Iran that went online a couple months ago. Seems crude went parabolic about that time.

    Iran has been stockpiling crude in their ships in the harbors without shipping it out.

    Oil will not come down until OPEC decides they want it to. They keep blaming speculation, but they are the ones causing the speculation by keeping supplies artificially tight. This allows peak oil theorists to have their day in the sun.
  9. gangof4


    i am no friend of OPEC, but i don't agree. if you listen to the CEO's of US oil companies, they say supply isn't the issue. the fact is that there is a lot more supply of crude than refinery capacity to process it. and... refined stocks are at multi-year highs.

    my understanding of Iran's ship storage is that they are having trouble selling as much as they'd like as their oil is high sulfur, hard to refine, and several of these specialized refineries have production offline. i tend to think that Iran is keeping it in the ships to tie up freighter capacity as another tool to manipulate oil prices.
  10. Look at the EIA and IEA #s. The supplies are unchanged because the demand has actually fallen.

    The increase in China/India demand has been more than negatively offset by lack of US and developed world demand.

    Global diesel is the only bullish story here ... I think that has something to do with efficiency and lower production possibilities afforded by US ethanol mandates, however.

    I'm also not sure about refinery capacity limitations here either. 85% utilization seems to suit demand just fine. Gasoline cracks tell the story there is no shortage of refinery supply. A bullish situation for refiners is when we are running at 95%+ utilization and inventories keep declining week over week.

    Right now, refiners are producing less because there just isn't demand.
    #10     May 9, 2008