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cel cel is offline
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Price per barrel of oil

There are a number of you on this board that know a lot more about futures trading than I and I have a question. Could the oil producing countries (mostly middle eastern countries) use their large amount of cash to control the price per barrel. They could bid the price up knowing when they will stop and then sell short while it is going down. In the meantime making more on the oil they sell. If this is possible then the only reason I can think it would be going down now is to head off a world economic collapse.
I would appreciate intelligent comments.

Old 10-28-2008, 03:04 PM
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How many Trillions of USD would it take to manipulate the price of the worlds oil production? Does any player or consortium of players have that much where with all?

What seems to have happened is that after the sub-prime was no longer lucrative and was heading south many of the investors needed a NEW way to make money and that was the commodity markets in general. Oil only being one component of the market. Thus a new bubble was created.

That along with the devaluation of the dollar due to the rising Federal Debt and deficit spending. Now that the USD is on the rebound that sounded the death knell of commodity speculation.

Once the commodity bubble started to deflate the Investors had no further way of propping up their financial house of cards and they all started to fail or unwind their positions.

The real economy UNTIL the coming unglued of the credit markets was in reality little effected by the Sub-prime debacle
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Old 10-28-2008, 03:36 PM
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Quote:
Originally Posted by cel View Post
There are a number of you on this board that know a lot more about futures trading than I and I have a question. Could the oil producing countries (mostly middle eastern countries) use their large amount of cash to control the price per barrel. They could bid the price up knowing when they will stop and then sell short while it is going down. In the meantime making more on the oil they sell. If this is possible then the only reason I can think it would be going down now is to head off a world economic collapse.
I would appreciate intelligent comments.
They don't really need their cash to manipulate oil since they have the oil itself. They can offer to sell more and drive the price down, or offer to sell less and drive the price up.

OPEC is a cartel with a significant enough portion of the market that they do have significant ability to manipulate -- at least in the shorter term, if everyone in the cartel cooperates and sticks to agreed upon production quotas.

Tabs is right about the dollar appreciating in value against other major currencies, and this hurts the price of oil, but the recent appreciation is largely the result of recent world-wide moves by investors to move to the "safety" of U.S. Treasuries.

In order for foreign investors to buy Treasuries, they have to sell their local currencies and buy dollars, then use the dollars to buy the Treasuries. This action causes the dollar to increase in value relative to the value of other currencies -- and drives the price of oil down as oil is traded primarily in dollars.

I wouldn't describe the recent high prices as any "bubble" -- the lower prices we have seen in oil -- and across the board in commodities -- is just a temporary result of the credit unwinding and capital flight to perceived "safe" investments. The monetary inflation being practiced by all the world's central banks has not slowed, but has actually increased in recent months.

Price inflation in all commodities will return within the next months and years -- even faster if the Fed takes action to "print money" at a faster rate than the other central banks around the world.

Specific to the price of oil right now, I also suspect that the friendship between Bush-senior, and the Kuwaiti and Saudi royal families is driving "cheating" (excess production contrary to agreed upon OPEC limits) by Kuwait and Saudi Arabia. The goal (largely achieved) was to drive the price of oil down in the hopes the population would be less likely to want a "party change" in the Presidency at election time.
Old 10-28-2008, 04:33 PM
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cel cel is offline
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oil production

My only thought on them controlling the price by controlling the production would be if they decreased production and drove up the price the world would blame them openly. The other way no one would know.

Old 10-28-2008, 05:39 PM
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