View Full Version : Economics This is BS, oil jumps $ 25.00 per barrel ....

09-22-2008, 01:23 PM

Oil spikes $25 a barrel on anxiety over US bailout

12 minutes ago

NEW YORK - Oil prices spiked more than $25 a barrel Monday the biggest one-day price jump ever as anxiety over the government's $700 billion bailout plan, a weak dollar and an expiring crude contract ignited a dramatic rally.

Light, sweet crude for October delivery jumped as much as $25.45 to $130 a barrel on the New York Mercantile Exchange before falling back to settle at $120.92, up $16.37. The contract expired at the end of the day, adding to the volatility as traders rushed to cover positions; the October price began accelerating sharply in the last hour of regular trading, a common occurrence when a contract is about to go off the board.

Still, the rally, which shattered crude's previous one-day price jump of $10.75, set June 6, showed the intensity of emotion in the market. The Nymex temporarily halted electronic crude oil trading after prices breached the $10 daily trading limit. Trading resumed seconds later after the daily limit was increased.

The November crude contract, which became the front-month contract at the end of Monday's session, was trading at $108.69, up $5.94, still a sharp gain.

In other trading, gold prices shot up more than $44.30 to settle at $909 an ounce, and other safe-haven commodities also rallied, underscoring investors' uncertainly about the direction of the economy and their fear of more turmoil ahead.

"We're off to the races again," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "There's a renewed scramble for commodities because of a general weakness in the dollar."

Crude has gained about $30 in a dramatic four-day rally that has at least temporarily halted oil's steep two-month slide below $100. At this rate, crude is within striking distance of its all-time record of $147.27, reached in July.

Oil's sharp gains came as energy traders grappled with the implications of the government's proposed $700 billion initiative to stem the U.S. financial crisis by absorbing billions of dollars of banks' bad mortgage-related securities. Anxiety over the plan also sent stocks sharply lower Monday; the credit markets were calmer than they were last week, but still showing the effects of investors' nervousness.

"They're going to have to continue auctioning off a whole lot of Treasurys to finance these projects, so the dollar is going to suffer," said Matt Zeman, head trader at LaSalle Futures in Chicago. "Right now it's fear and anxiety driving people who want tangible assets.

The 15-nation euro rose to $1.4807 in afternoon trading, up from the $1.4470 on Friday. A weak greenback was a catalyst for the commodities boom of the past year, and analysts said large investment funds were expected to pour money back into the sector.

"That trade was very successful in past so if the dollar keeps weakening, a lot people are going to want to own hard assets like crude," said Andrew Lebow, senior vice president and broker at MF Global in New York.

But there is still much uncertainty about what impact the U.S. rescue plan will have on energy demand. Oil's run-up near $150 a barrel in July and a weak U.S. economy has forced Americans to cut back on their driving and led business to scale down operations. Though pump prices have eased from record levels above $4 a gallon, they remain expensive, and more softening in the economy would likely further curtail energy use in the world's thirstiest consumer.

"There are a lot of issues to be filled in. It's an extraordinarily complex situation," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "The market is digesting how the (rescue) package will work and the implications for the U.S. economy."

U.S. congressional leaders endorsed the plan's main thrust, saying passage might occur in a matter of days. But they also want independent oversight, protections for homeowners and constraints on excessive executive compensation, House Speaker Nancy Pelosi said Sunday.

Treasury Secretary Henry Paulson pushed lawmakers, who received the package on Saturday, to approve the proposal as soon as possible.

The Federal Reserve also announced late Sunday it granted a request by investment banks Goldman Sachs and Morgan Stanley to change their status to bank holding companies, a move that will allow the two institutions to open commercial banking subsidiaries, greatly bolstering their resources.


09-22-2008, 01:25 PM
Wonderful......... :(

09-22-2008, 01:27 PM
With the value of the dollar dropping minute by minute, this is no surprise.

09-22-2008, 01:28 PM
Ok it is time to be in the market and play the bear. If the economy falters so will real demand for oil. Most people had oil prices too high. A bunch of people trying to make money on the up and down are now vulnerable to higher price. Except short trading has been curtailed and so there is no real counter to a bull reading.

09-22-2008, 01:28 PM
this time it will be worse. The dollar is going to go into freefall if the corporate welfare bailouts occur.

Also if this bailout occurs then republicans and conservatives in general can't bitch about poor people getting welfare until they've taken as much as corporate America has during this administration. Based on how much the feds spend on social welfare I figure that should take about 300 years.

09-22-2008, 01:29 PM
STFUhold everyone hostage with a gas nozzle

09-22-2008, 01:46 PM
STFUhold everyone hostage with a gas nozzle

They will ....... how much of a jump at the pump ?

.25 - 30 cents a gallon ?

09-22-2008, 01:48 PM

09-22-2008, 02:18 PM
Gee, when you have a plan to monetize 700b in debt, the dollar weakens? Say it ain't so!

09-22-2008, 02:32 PM
There are riots going on as we speak.

09-22-2008, 02:39 PM
It's not BS, it's reality. The philosophy and policies that lead to this mess are BS.

09-22-2008, 02:59 PM
No surprise, no surprise at all. The US$ is now the sacrificial lamb of the Fed and U.S. Treasury. They finally admitted it through their recent actions. High inflation is the path of least resistance.

09-22-2008, 03:04 PM
does this bill also pay jackson county taxpayers for dumping a shitload of money on a worthless team?

09-22-2008, 03:05 PM
Carl Peterson has 20 years of experience screwing over tax payers and fans alike, just to milk more money for his pockets...

hed be great for washington.

why i bet he could even make a run for presidency

Mr. Laz
09-22-2008, 03:06 PM
i know it's been said, but imo it can't be said enough

if we would of spent our "war chest" on building the infrastructure for hydrogen fuel instead of invading Iraq the entire oil and financial landscape would be different right now.

American cars off oil

1. oil companies lose pricing leverage
2. U.S. import/Export more level
3. less U.S. money to nations funding terrorism
4. brand new AMERICAN energy industry providing new jobs
5. boosts AMERICAN car sales
6. product prices across the board lowered because of lower transport cost

oh yea ........ cleaner environment too :D

'Hamas' Jenkins
09-22-2008, 04:20 PM
You can't just create money out of thin air. We are the Weimar Republic.

09-22-2008, 04:22 PM
Again ... it is insane to allow profit speculation in oil. Insane.


'Hamas' Jenkins
09-22-2008, 04:22 PM
Again ... it is insane to allow profit speculation in oil. Insane.


Speculators have to feed their families, FAX.

09-22-2008, 04:27 PM
This might help shed some light:

Sept. 22 (Bloomberg) -- Crude oil climbed more than $25 a barrel, the biggest gain ever, as traders scrambled to unwind positions on the October contract's last day of trading. The more-active November contract rose $6.62.

``This looks like a squeeze play,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``All of the contracts are up, but nothing like October. This is the last day of trading and someone is scrambling to guarantee supply.''

Crude oil for October delivery rose $16.37, or 17 percent, to settle at $120.92 a barrel at 2:46 p.m. on the New York Mercantile Exchange. It was the highest settlement price since Aug. 21. Futures for November delivery rose 6.4 percent to settle at $109.37 a barrel.

Prices climbed today as traders who sold the October contract last week, when oil dipped close to $90, had to buy the futures back. In a squeeze a trader has gone short by selling contracts hoping the price will decline. In the last days before the contract expires the trader must buy back the same number of futures or be forced to deliver the underlying oil.

``I don't think there's any doubt that's the indication of a huge squeeze,'' said Craig Pirrong, director of energy markets for the University of Houston's Global Energy Management Institute. ``It's just stunning this could happen'' given the recent scrutiny in Congress and among U.S. regulators concerning the crude oil markets, he said.

`Yawning Gap'

``It's a very small pool playing in this market right now, and that's why you're seeing those massive differentials'' between the October and November contracts, said David Kirsch, an energy markets analyst at PFC Energy in Washington. ``Somebody did place a wrong bet and is trying to cover that position.''

``The overarching factor is that the October futures contract expires today,'' said Ryan Oatman, an analyst at SunTrust Robinson Humphrey in Houston. ``This is a classic short squeeze. What lead up to it was a strong euro, up on concerns U.S. government actions will ultimately result in a greater budget deficit, higher inflation and a weaker dollar.''

Investors looking to hedge against the dollar's decline earlier this year have helped lead oil, gold, corn and gasoline to records. Oil rose as high as $130 a barrel, up from $104.55 on Sept. 19, as the dollar dropped on concern that a U.S. proposal to buy $700 billion of troubled assets from financial firms will deepen the budget deficit.

The dollar declined 2.4 percent to $1.4817 per euro, from $1.4466 on Sept. 19. It touched $1.4818, the weakest level since Aug. 22.

Hard Assets

``Gold, silver, oil, copper, just about any hard asset, is looking good at this point,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``With the dollar down and stocks getting hit, commodities look like a safe play.''

Oil has risen 33 percent since Sept. 16 as lawmakers pledged fast consideration of the Treasury's plan to buy devalued mortgage-related securities.

``There's a flight to quality and the energy markets are benefiting,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``The dollar is down again and investors are fleeing to commodities. We are back to the cycle that pushed prices to records earlier this year.''

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended Sept. 16, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 19,379 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report.


Gasoline for October delivery increased 10.41 cents, or 4 percent, to settle at $2.7038 a gallon in New York. Heating oil rose 14.52 cents, or 5 percent, to settle at $3.043, the biggest single-session gain since June 6.

Regular gasoline, averaged nationwide, declined 1.8 cents to $3.739 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices reached a record $4.114 a gallon on July 17.

Crude oil prices are ``too high'' because the global economic slowdown may spread and cut consumption, the International Energy Agency's deputy executive director said.

``The economic slowdown in the U.S., Europe hasn't gotten into China, India much, but at some point you have to presume it will,'' William Ramsay said in an interview in Bangkok today.

The Paris-based IEA, which advises 27 developed nations on energy policy, was set up in 1974 in response to the Arab oil embargo.

Brent crude oil for November settlement rose $6.43, or 6.5 percent, to settle at $106.04 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

09-22-2008, 04:29 PM
Again ... it is insane to allow profit speculation in oil. Insane.


What would you suggest be changed?

09-22-2008, 04:39 PM
Again ... it is insane to allow profit speculation in oil. Insane.


That sentence makes absolutely no sense. Profit Speculation? What's that?

For the uninformed, there are two sides to EVERY trade in a futures contracts. One side makes money, the other side loses money.

09-22-2008, 05:29 PM
That sentence makes absolutely no sense. Profit Speculation? What's that?

For the uninformed, there are two sides to EVERY trade in a futures contracts. One side makes money, the other side loses money.

Of course. Exactly 1/2 of all commodity speculators are in it to lose money. I forgot about those guys.

Mr. Donger, we didn't always have speculation in oil. In the short term, perhaps we could merely require that futures contracts be purchased dollar-for-dollar. That would help some.


09-22-2008, 07:18 PM
Actually it makes perfect sense, it is also why I put so much into Gold.