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Charts & Hedging

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Ron was educated as a mathematics teacher, trained as a land use economist and has been involved with trading futures for more than 20 years.

Fraud in Oil and Gas?

Apr 22, 2011

 I imagine most of you will have heard or seen something about Amaranth unlawful manipulation of the gas market. Here is one such post:

http://www.bbc.co.uk/news/business-13166033

Natural gas is easier to manipulate than crude because there are fewer traders, fewer contracts traded. I will "do the numbers" over the weekend. 

Most will remember the Enron scandal of some years ago. Recall, if you will, that Enron electricity traders were manipulating that futures market. The unlawful manipulation cost rate payers in California alone more than $1 billion.

On the other hand, manipulation need not be of the illegal/unlawful variety to skew the markets. All that is required is for the regulators to fail to enforce position limits stringently. The G.W. Bush administration made it clear to the CFTC that any employee who stringently enforced position limits in crude oil would be fired. Of course, both Bush and Cheney had and still have large holdings in the oil patch. I'm not aware of Obama holding any oil patch interests, but I am aware that the big banks, the facilitators of position limit 'skirting,' are still free from appropriate regulation. I suppose one can expect little else from an administration that, like its predecessor, employs Wall Street Bank former employees and/or aficionados as Sec. of Treasury and in other staff jobs that offer advice to a presumably well-meaning but financially ignorant president. 

Last week I remarked that just maybe the funds were going to take profits in crude, based on the Commitment of Traders numbers. I'll look at that over the weekend as well; those numbers have just been released.

I sure hope the weather across all America's croplands rearranges itself soon. Too few have even reasonably good planting conditions for the third week in April.

 

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