Joined: Oct 23, 2004 Posts: 5504 Location: New Jersey
Posted: Sat Nov 10, 2007 11:47 pm Post subject: Times (UK) Blames High Oil Prices on 3 Hedge Funds
This is the first time I have seen very specific hedge funds being blamed for high oil prices. Nothing illegal is alleged; in fact the hedge funds have an outstanding success record.
I have not heard about this before and don't know if these funds really have as much influence as implied here.
I would also like to point out (for the 20th time) that Murti in 2005 did not predict $105 oil sometime from 2007 to 2009, but that it could happen under certain political circumstances [I read the complete original report and it projected that oil prices would probably not be higher than $80 by 2007].
Quote:
From The Sunday Times
November 11, 2007
Petrol £1 a litre: blame City’s oil kings
THREE science graduates with a combined fortune of more than £500m have emerged as the commodity traders who led the “oil rush” that has pushed petrol prices to more than £1 a litre.
David Harding, Michael Adam and Martin Lueck are renowned in the City for their skills in targeting the most lucrative trades in commodities, including oil.
Their system - known as the “black box” and based on mathematical algorithms - is now deployed by three of the biggest hedge funds in London and has helped push oil prices towards $100 a barrel.
The three funds, AHL, Aspect Capital UK and Winton Capital Management, control more than £15 billion of funds used to buy future oil contracts and other commodities, usually on the gamble that prices will rise.
Times on line - UK _________________ It's already over, now it's just a matter of adjusting.
Posted: Sat Nov 10, 2007 11:55 pm Post subject: Re: Times (UK) Blames High Oil Prices on 3 Hedge Funds
DantesPeak wrote:
timesonline wrote:
Their system - known as the “black box” and based on mathematical algorithms - is now deployed by three of the biggest hedge funds in London and has helped push oil prices towards $100 a barrel.
The three funds, AHL, Aspect Capital UK and Winton Capital Management, control more than £15 billion of funds used to buy future oil contracts and other commodities, usually on the gamble that prices will rise.
Does betting on a sports event affect the outcome? I don't understand the logic behind the idea that speculating on commodity futures affects the long term price. Sure, short term prices can be affected and actually buying up (physical) product and storing it will make a difference, but otherwise I just don't see it.
Joined: Nov 24, 2004 Posts: 9 Location: England,Canvey Island
Posted: Sun Nov 11, 2007 8:48 am Post subject: Re: Times (UK) Blames High Oil Prices on 3 Hedge Funds
The Nymex Crude Futures contracts are settled at expiry by delivery of oil. So a hedge fund will have to close any long positions before expiry unless they want to take delivery of the oil. The hedge funds will not want the expense of having big storage facility’s full of oil, and will just close the position and move it to the next dated contract. This means hedge funds can have little if any effect on the price of oil at the expiry date of the contract.
Even before the expiry day there effect is limited because if the commercial traders AKA big oil company hedgers think the price has been pushed to high they will sell it to lock in profits for there company.
Joined: Oct 23, 2004 Posts: 5504 Location: New Jersey
Posted: Sun Nov 11, 2007 10:06 am Post subject: Re: Times (UK) Blames High Oil Prices on 3 Hedge Funds
I agree with sjn and andy2001. In the very short term futures trading has some influence on price. But with 85 million barrels consumed and delivered every day, futures trading doesn't seem to have much - if any - long term effect.
Granted it may be possible to take enough physical delivery and/or buy/rent oil storage tanks to physically disrupt the market. But even then the effects would probably be limited to the area where that occurs, and that's not what's claimed here.
Quite frequently oil companies want to lock in the price they will receive by selling futures, so their loss in this case is the traders gain. _________________ It's already over, now it's just a matter of adjusting.
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