Saturday, June 7, 2008

Why Oil Spiked: Connecting the Dots with Eric Bolling

From 1440 Wall Street:
I have been trying to lay out a thesis explaining what was going on behind the scenes in the energy markets over the past week, although it was largely ignored by the media and bloggers.

It started on May 29th when I ran with a story that no one appreciated at the time:

The dramatic decline today in the price of crude oil (USO-AMEX) might be the first act in a drama that plays out over the next several months. The big money crowd on Wall Street is whispering that an ongoing probe will snare high profile energy traders, hedge funds and government officials from both sides of the aisle.

Kooky? Absolutely, but I ran with it over the next week, intently watching the price of crude, using the Oil ETF (USO-AMEX) as my proxy.

June 1st
Are the financial markets underestimating the ongoing investigation into manipulation in the commodity markets? The recent decline in crude oil (USO-AMEX) might have been, in part, due to the unwinding of speculative long positions. But with financial concerns in control of much of the storage and distribution infrastructure, ongoing investigations are about much more than mere leveraged long positions in the futures markets.

Persistent rumors place a large amount of crude "on the water", ie. in tankers waiting to deliver. Back in the late 1990's I would talk to people in the upper floors ot the World Trade Center who could see tankers loitering outside the Verrazano Narrows, waiting for the right time to make their delivery. And while that is a slight exaggeration, you get the point.

But I digress. On Thursday things really got interesting....MORE