Tuesday, July 01, 2008

Apparently China not the only hoarding location-smoking gun on oil

The linked post at Peak Oil Debunked gives us the smoking gun on oil hoarding by speculators. POD posts excerpts from several main stream journalism sources and I will excerpt the excerpt:

"A LARGE warehouse in Amsterdam may seem an unusual place to attract the City’s top traders and hedge funds. But, in the past few months, Morgan Stanley has been accumulating warehouse space in the Netherlands to store its hottest new property — oil...Meanwhile, banks such as Morgan Stanley are also beginning to move into the physical market to buy oil — or even entire oilfields.Goldman Sachs recently bought 10m barrels of oil...Morgan Stanley and Deutsche bank recently bought the rights to 36m barrels of oil between 2007 and 2010 direct from a North Sea oilfield.Source"

There it is, plain as day...

"The shrewdest competitors in the energy-trading world these days deal heavily in physical shipments of fuel, not just contracts for the future delivery of such commodities. Owning actual oil, natural gas, propane and even electricity has two big advantages. It provides detailed knowledge of regional supply and demand and the pricing power that comes from holding large quantities of commodities.[...]An explosion in the number of participants in the energy-trading world has led to an increase in so-called physical trading.Dominant commodity traders such as Morgan Stanley and Goldman Sachs Group Inc. long have had strategies to own or lease fuel-storage terminals, oil tankers and power plants to give them more flexibility to hold onto inventory or sell it at opportune moments.More recently, those Wall Street firms have taken physical trading to new levels with bids to buy, not lease, distribution facilities such as pipelines and production facilities including refineries. Hedge funds also have gotten into the game of dealing in physical energy and even metals assets."
So when Goldman makes a forecast for the price of oil, it's based on their knowledge of their own holdings...and since price volatility happens at the margin they are in good shape to take advantage.

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