ANALYSIS=>>Was Insider Trading Responsible For Sharp Slide In Crude Oil Prices This Week?
Markets were seemingly taken by surprise this week on crude oil prices, led by a $3 drop on NYMEX this past Monday. There have been a couple of different analyses offered on the recent oil price drop from Monday September, 17th.
The Reuters explanation is predictable and may be too cursory.
The first explanation offered was of an algorithmic programme gone wild, followed by a price correction due to being at recent highs of $120/barrel on BRENT and $100+ on NYMEX. These were the favorites, however the drop in prices isn’t due to just one factor, and possibly even a result of insider knowledge.
October futures options expiring on Monday and the general contract expiring today certainly had a cascading effect, featuring a $3 drop in 1 minute (on NYMEX) on Monday, before regaining approximately $1 at the close. This was the last chance for traders to get on board the latest trend and clearly the trend has continued with crude falling Thursday below $91/barrel ($90.66) on NYMEX before closing at at $91.87. NYMEX crude even briefly fell just below its 100-day moving average at $90.73, sparking strategy shifts.
Other rumors about the effect of possible Saudi intervention via increased production and a potential US election surprise from a Strategic Petroleum Reserves release also weighed on markets. The markets are not a monolithic entity by any stretch and what tends to happen is that regardless of the prevailing notions, a trend can be started by one factor but exacerbated by others. The fact is that the “markets” are traders (or high frequency computers commanded by traders, and it’s not always the news specifically which drives markets, as the human mind doesn’t always produce the most economically efficient decision. The “tunnel vision” thinking of a trader’s one track mind often obscures real news and trends are furthered by the ripples caused from the initial change in numbers. This logic applies to the high frequency trading computers also which move markets quickly just based on how trading metrics are analyzed by expensive algorithms (which are gold on Wall Street).
Today, a more likely reason for the price move emerged. A reported meeting Tuesday between Catherine Ashton, negotiator for the United Nations Security Council’s 5+1 (the permanent members of the plus Germany) handling talks over Iran’s nuclear policy, who met with Iran’s Foreign Minister Saeed Jalili for “informal discussions” on the situation. This meeting was held on short notice and outcome is unclear but some feel there has been a positive policy sea-change in Iran, putting the onus on the West to help resolve the situation.
In light of that news, emerging reports of curious crude oil transactions points to insider knowledge. On Monday, preceding the $3 drop in prices, “some 13,000 contracts of CME’s West Texas Intermediate crude oil contract and 10,000 contracts of the Intercontinental Exchange’s (ICE’s) Brent/BFOE crude oil contract” were unloaded on the market by affiliated sellers possibly emanating from Saudi Arabia, according to Asia Times. It stands to reason that some individuals had early warning that the Middle East risk premium, said to add $10-$15 to the barrel price, would be coming off the market price. With most traders looking for crude to trend higher coming in Monday the 17th, the turn-around on options day bears some scrutiny. Whoever made these trades beat the market, probably with high frequency trading help and led the rest of the market lower for this weekly cycle.
What effect these developments have remains to be seen as it gets lost in the fog of war, but in the short term, the global economy stands to benefit from depressed prices.
The fact that cheaper oil will mean less profit for producers, such as Russia, Venezuela Saudi Arabia, will not impact on Iran as they have been selling for anywhere up to 25% less than market price anyway due to the hostilities and sanctions. That oil has to go somewhere and China, among others, has been a willing buyer. The sanctions have not really done much other than cause a few headaches and extra planning for Iran as the temporary effects are beginning to wane, which the Washington Post just noted yesterday. The biggest problem was the insurance companies blacklisting tankers carrying Iranian crude, but that has subsided as shippers have found various workarounds.
A potential deal with Iran to end the diplomatic stalemate will come with benefits to the West. The benefits of a deal
1. Cheaper energy costs to the West in the short term, helping to reduce strain on the economy.
2. A thaw in the Russian energy stranglehold monopoly over Europe, to which Russian earnings are heavily reliant.
3. There is also the question of Bahrain where the rulers are seen to be losing their grip on the country.
If Bahrain falls into the hands of the rebels, then America’s 5th Fleet, will no longer have a base and will also open up a weak flank towards Saudi Arabia. The Shi’ite rebels are said to be influenced by Iran and some Saudi Arabian oil fields are located in Shi’ite territory.
It would be more fortuitous to make a deal with Iran, which would have many benefits including averting a nasty conflict. The only way this deal would go through, is with China’s backing as Putin and Russia will most certainly not want to broker such a deal that will strip them of future earnings and power.
China is only ever interested in greater economic activity via increased trade, cheaper energy and raw materials, not in war per se. China will also be very pragmatic, providing the islands situation with Japan de-escalates also, as it is something neither country really wants to go to war over. These oil fluctuations are just yet another act in the theater that the Elites have provided us with increasingly over the last 12 years and beyond.
Against this backdrop, Israel would be forced to tone down the aggressive rhetoric and resolve the ongoing Palestinian open sore of a problem instead, unless there is a false-flag “event” of questionable origins.
The problem with any deal is that, at the highest levels, the countries in the coalition against Iran are all commanded by New World Order collaborators. In the long run, the real solution lies in Western populations awakening to this fact. America also has the potential to be energy self-sufficient in the next 10 years or so if it makes a concentrated on rebuilding. Europe on the other hand will need strategic mutual understandings for their energy needs to be stabilized.
Inflationary pressure from the new unlimited quantitative easing program recently announced by the Federal Reserve is part of the reason equities and commodities (now ex. oil) have continued to trend higher, shrugging off negative economic indicators. Aside from the Middle East tensions, with crude oil being a de facto currency, the price would normally be driven higher by the extra “punch” from the Fed. These factors had given some support to crude oil prices but the impact of deflationary forces and new developments from Iran may outweigh the upward price pressures and will be an interesting trend to watch over the next couple of weeks.
This is ultimately a global conversation for freedom from tyranny, as oil wars continue to break out and it remains the primary source of energy for billions of people. Access to energy controls life for most people and it will only be a good thing if this devastating war is averted.