Oil market manipulation and Senator Sanders

U.S. oil speculative data released by Senator, sparking ire – Yahoo! Finance

WASHINGTON (Reuters) – Oil trading data that exposed the extensive positions speculators held in the run-up to record high prices in 2008 were intentionally leaked by a U.S. senator, sparking broader concern about industry confidentiality as Congress moves on Wall Street reform.

Senator Bernie Sanders, a staunch critic of oil speculators, leaked the information to a major newspaper in a move that has unsettled both regulators and Wall Street alike.

In a June 16 e-mail reviewed by Reuters, a senior policy adviser to Sanders discusses how his office received private data with the names and positions of traders and forwarded it exclusively to a Wall Street Journal reporter.

The e-mail, which also attaches two files with the data, was sent to Public Citizen’s Tyson Slocum asking him to review it and speak with the newspaper about his observations.

In a statement from Sanders provided to Reuters, Sanders said he felt the data needed to be publicly aired.

“The CFTC has kept this information hidden from the American public for nearly three years,” he said. “This is an outrage. The American people have a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today.”

The CFTC has position limits in place for certain commodities:

Speculative Limits – CFTC

“To protect futures markets from excessive speculation that can cause unreasonable or unwarranted price fluctuations, the Commodity Exchange Act (CEA) authorizes the Commission to impose limits on the size of speculative positions in futures markets.

Most physical delivery and many financial futures and option contracts are subject to speculative position limits. For several markets (corn, oats, wheat, soybeans, soybean oil, soybean meal, and cotton), the limits are determined by the Commission and set out in Federal regulations (CFTC Regulation 150.2, 17 CFR 150.2).”

The point, of course is to prevent one or a few large traders from manipulating the trading in specific contracts…the biggest reason is to keep food prices from whipsawing as that would lead to civil unrest.

However, the CFTC had not had position limits on oil futures: CFTC Position Limits on Oil Speculation Will Not Take Effect Until 2012, Agency Announces | HeatingOil.com

I haven’t looked at Sanders’ data yet, but I’m pretty sure that it will show certain large traders entered into massive long contracts on oil pushing up prices. What OPEC does is irrelevant; what we’re talking about is domestic market manipulation.

From that second link, dated January 2011:

“After more than a year of debate and uncertainty, the Commodity Futures Trading Commission (CFTC) has announced a clear time line for implementation of position limits on speculative investors in oil and other products. Reuters reported on Tuesday that the CFTC’s latest filing sets early 2012 as the goal for application of the position limits intended to reign in volatile prices for crude oil, heating oil, and other energy and metal commodities.”

US gasoline consumption has been falling for several years due to high gasoline prices which are a function of crude oil prices, among other things.  This should have had a dampening effect on crude oil prices.

Here are related links discussing this subject:

Congressman recognizes oil futures manipulation « Wasatch Economics

Traffic volume and fuel consumption in the US reflect weak economy « Wasatch Economics

Oil speculation « Wasatch Economics

From that last link:

“Study Argues C.F.T.C. Missed Oil Speculation:

“A new academic study contends that speculation by financial players like banks, hedge funds and index funds was behind the steep rise in oil prices last year and says that the Commodity Futures Trading Commission used models that were “not adequate” when it argued that speculation was not a major factor in the oil price spike. “

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2 Comments »

  1. […] an unflinching, single click of the mouse, Sen. Sanders sent an email on June sixteenth to a Wall Street reporter leaking what was thought to be secure data on the names […]

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