really? is that why XOM's refining business is getting killed? seriously this idea that oil companies like XOM magically buy oil cheaper is silly. refiners are getting destroyed by high oil prices because THEY HAVE TO BUY OIL ON THE OPEN MARKET.
and if it just speculators driving up price and not actual demand then why aren't oil companies selling the crap out of the contracts that the speculators are buying?
well the other trader who was down on the floor agreed with rick. show me ONE floor trader who says speculators and not demand and the dollar are driving oil. the speculators have to roll their contracts over at the end of each month. that means THEY HAVE TO SELL THE CONTRACTS THEY ARE LONG or get stuck with delivery.
http://krugman.blogs.nytimes.com/2008/04/20/commodities-and-speculation-metallic-evidence/ from paul krugman...obviously not a republican lol Commodities and speculation: metallic (and other) evidence We’ve had a huge runup in commodity prices — fuels, food, metals. But why? Broadly, the debate is between those who see it as a speculative phenomenon, driven by some combination of low interest rates and irrational exuberance, and those who see it as a collision of rapidly growing demand with constrained supply. My problem with the speculative stories is that they all depend on something that holds production — or at least potential production — off the market. The key point is that the spot price equalizes the demand and supply of a commodity; speculation can drive up the futures price, but the spot price will only follow if the higher futures prices somehow reduces the quantity available for final consumers. The usual channel for this is an increase in inventories, as investors hoard the stuff in expectation of a higher price down the road. If this doesn’t happen — if the spot price doesn’t follow the futures price — then futures will presumably come down, as it turns out that buying futures produces losses. (click the link to view the charts...i am too lazy to post them) Which brings me to this chart, from the IMF’s World Economic Outlook: Bubble, bubble, where’ the bubble?As far as I can see, this creates real problems for any claim that high metal prices are speculatively driven. Food inventories are also historically low. I just don’t see how a low-interest-rate or bubble story works here. Add: The USDA data (big pdf) show stocks of wheat and other grains declining in recent years. And here’s oil: There’s nothing happening here …
I watched the video and strangely have been reading up on commodities the past few days. It's all starting to make sense. Thanks for you input Robbie.
He didn't sound like he knew a lot except how to scream. To me, that rarely passes for knowledge. There were four or five other market specialists who either disagreed or tried to get him to expand his answer, but he wouldn't. Do you agree or disagree that stopping the 5% speculation and making speculators put up 50% would curb the excessive speculation we now have?
But why are floor traders the only ones that understand futures contracts? You think analysts, hedge fund managers, etc all fundamentally don't understand the things they are buying/analyzing/etc?
The oil companies pay fixed price to drill, so any increase in price puts money in their pockets. I didn't say refineries were making a killing. I said the oil companies. Here is a quote from an article from CNN. http://money.cnn.com/magazines/fortune/fortune_archive/2007/04/30/8405398/index.htm
And if you really knew half as much as you claim, you would know that companies like XOM have long term contracts that set the price ahead of time. That is how they end up with their record profits at a time of record prices.
Exxon profit disappoints despite high oil prices May 1, 2008 6:09 PM ET advertisement Article tools * E-mail this article * Print-friendly version * Discuss this article Stocks mentioned in this article Exxon Mobil Ord Shs (XOM) Stock Quote, Chart, News, Add to Watchlist ReutersAll Reuters news NEW YORK (Reuters) - Exxon Mobil Corp posted a $10.89 billion first-quarter profit on Thursday, but still managed to disappoint investors as weak production volumes and low refining margins blunted the impact of record-high crude prices. Earnings rose 17 percent year over year, and were the second-highest in U.S. history, but still fell short of Wall Street expectations, and its shares dropped 3.6 percent. Exxon's near-record profits brought sharpened scrutiny from politicians and consumer groups, who are upset about sky-high gasoline prices at the pump. Benchmark U.S. oil prices averaged a record of nearly $98 a barrel during the quarter, up about 70 percent from a year earlier. Exxon posted record earnings of $40.6 billion in 2007, with revenue higher than the gross domestic product of Turkey, the world's 17th-largest economy. If oil prices stay above or around $100 for the remainder of 2008, the company could beat that mark. A steep drop in profit margins for gasoline cut into Exxon's earnings as the company, like other refiners, struggled to pass on higher crude costs to customers. First-quarter gasoline prices rose 33 percent year over year in the United States -- less than half crude's rise. Exxon's oil and gas production also fell 5.6 percent in the quarter. Chris MacDonald, portfolio manager at WHG Funds, said the production decline was "kind of shocking." "It makes the future seem kind of dire, because this quarter they really got bailed out by high oil prices ... It kind of shows that you're at the limit of big new finds." The company has been criticized by analysts and investors for laying back on capital spending while going full bore on share buybacks. Exxon spent $31.8 billion to buy back shares in 2007, while shelling out $20.9 billion for capital expenditures. In 2008, the company expects to increase its capital spending to around $25 billion. "It seems that they are more of a share buyback machine that also happens to produce energy," MacDonald said. Earlier this week, European oil majors BP Plc and Royal Dutch Shell Plc posted big first-quarter earnings gains as the crude oil surge was an even bigger boon for them than expected. Both companies had flat production during the quarter. REVENUE OF $117 BILLION The world's largest publicly traded company earned $2.03 a share in the first quarter, up from net income of $9.28 billion, or $1.62 a share, in the same period last year. But analysts, on average, expected profit of $2.11, according to Reuters Estimates. Revenue rose to $116.85 billion from $87.22 billion. The company also had a whopping 49 percent effective income tax rate in the quarter, up from 44 percent last year, which also weighed on earnings. Earnings at its exploration and production segment increased 45 percent to $8.79 billion, while refining profits dropped 39 percent to $1.17 billion. The company said its production shortfall resulted in part from production-sharing contracts that give host countries a larger share of oil and gas produced as commodity prices rise. The decline of older fields and the loss of operations that were nationalized by Venezuela last year also hurt. Exxon reached a deal with a Nigerian oil union on Thursday after an eight-day old strike had shut down virtually all of the 800,000 barrels per day of production in the country, which could hit the company's second-quarter output figures. "The question is going to come, and you always have to ask it every year: Are they seeing any acceleration in mature field declines? Because slowly the majors are beginning to see this to some degree," said James Halloran, energy analyst with National City Private Client Group in Cleveland. Halloran is concerned because very little of the volume shortfall appears to be one-time items such as maintenance. Earnings at Exxon's chemicals unit dropped 17 percent to $1.03 billion. 'DEVASTATING CHOICES' "There is something seriously wrong with our economy when Exxon's record $11 billion in quarterly profits are seen as a disappointment by Wall Street," Democratic presidential hopeful, New York Sen. Hillary Clinton, said in a statement. "But on Main Street, middle-class families are facing devastating choices every day between buying groceries and filling up their gas tanks to get to work." Exxon shares closed down $3.37 at $89.70 on the New York Stock Exchange. The stock is off more than 4 percent this year, underperforming the Chicago Board Options Exchange's oil index , which is nearly flat over the same period.
i'm glad someone came to this with an open mind. this is so frustrating talking to people who just assume there is a massive conspiracy.
http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined http://finance.yahoo.com/echarts?s=...=on;ohlcvalues=0;logscale=on;source=undefined
you have seen the credit crisis, right? yes i know it's hard to believe that someone with a lot of money has no clue what they are doing but it happens everyday. i see it everyday. it's how i make money in the market. anyhow...everyone except the people blaming speculators understands it. you do understand that for every buyer in the market there is a seller....crazy concept. if you show me something that says futures contracts magically get dissolved for the benefit of the buyer then i will change my mind.
edit....i would like to apologize for any rude behavior in this thread. this topic just irritates the hell out of me and i am sorry. there were 2 people they were interviewing that were the different floors. rick and the guy from fortress trading. the others were in the studio. the others posing counter points are cnbc anchors who don't have a clue. for the most part santelli was yelling because he was down on the floor of the cbot (i think it was the cbot) and it is loud there. on almost every single report santelli is yelling. and he did expand his answer. he was the one who was doing the most explaining. cnbc is on the whole worthless but there are some very good commentators like rick santelli, david faber, art cashin, and even charlie gasparino can break some good stories. i have this channel on at work all day so i am viewing stuff from my perspective and the perspective of other traders. the counter point to your last question is....are sellers speculators? i have to put this in caps....THERE IS A SELLER FOR EVERY BUYER. yes the market certainly needs more regulation. many many areas of the market need more regulation. this is not in question. it is scary but there are much bigger things that need regulation. i think the completely unregulated debt swap market is somewhere around $65 TRILLION...yes TRILLION. anyhow, the fundamental cause for the run up in oil is stated in the xom earnings report i posted. xom's oil and gas production fell 5.6% versus an expected 1% drop. to end this...i am done with this thread. i am done with the "speculation" argument. if i see clear manipulation of the oil market i will post it. until then all of you guys are better off just accepting that the oil market is not being driven by MANIPULATIVE speculation. if there are a record amount of buyers of oil then there are a record amount of sellers! anyone in this thread who is worried and whining about oil speculation should start writing their congressman about government sponsored skyrocketing food prices from the corn ethanol subsidies. nah...who cares about that... maybe if we get the dumb loose money fed to have a smart surprise rate hike tomorrow then we will put an end to this dumb speculation argument. that would single handedly drop oil prices by 10 bucks. why? because the market looks to price future events in....omg is that....SPECULATION???? maybe if there was as much fervor against the loose money fed which is running out of money (yes running out of money) as there was for the oil speculation bs then we would get some things accomplished in this country.
the fact remains is that you've had inelastic demand with world demand exceeding supply for the last 6 months and that is in fact is what is driving up the price. As of July 1st, when supply increases kick in, we should see the spot prices for Oil begin to decline at least temporarily.
i said earlier i wouldn't post in this thread anymore but i figured i had to post this. since you guys won't believe me or anyone else then maybe you would believe the oracle of omaha. just tune the video to the 4:10 mark and you get your explanation from someone who you might listen to. http://www.cnbc.com/id/15840232?video=778195470&play=1
My firm's energy traders just issued a new buy signal on crude on Friday. Basically, they are placing new long orders on crude when the market opens on Sunday. Hopefully they are wrong. I personally think its better to buy on a pull back of 5-7 points though.
well i don't know how long they hold but if the ecb raises rates on thurs then they will get P A I D. as it stands now i don't think they are wrong to look to buy now. it's an "easier" buy on a pullback but oil has been just consolidating since that 11 dollar run up and these past few days represented a nice breakout.
