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Bankrupt Speculators
Today, the oil price is largely set in the futures markets. The two principal locales which dominate oil futures trading are the London-based International Petroleum Exchange (IPE), established in 1980, and the New York Mercantile Exchange (NYMEX), which is more than a century old, but also first started trading oil futures in 1983. Traders call futures contracts "paper oil": the contracts are a paper claim against oil, which is far in excess of the volume of oil produced and actually delivered at oil terminals on behalf of those contracts.
The traders transact a large volume of derivatives bets. Speculators purchase on the IPE and NYMEX exchanges, futures contracts; each single contract is a bet on 1,000 barrels of oil. More than 100 million of these oil derivatives contracts were traded on these exchanges in 2003, representing 100 billion barrels of oil. In a year 2000 study, EIR showed that on the IPE, for every 570 "paper barrels of oil"—that is futures derivatives covering 570 barrels—traded each year, there was only one underlying physical barrel of oil. The 570 paper oil contracts pull the price of the underlying barrel of oil, manipulating the oil price. If the speculators bet long—that the price will rise—the mountain of bets pulls up the underlying price.
But worse, there is a second layer of leverage. At the London IPE, the speculator can buy a futures contract on a margin of 3.8%. That is, were the speculator to buy a single futures contract, representing 1,000 barrels of oil at, say, an oil price of $40 per barrel, then the contract represents $40,000. However, the speculator pays only $1,520 for the premium of the contract—or 3.8% of the $40,000—which gives him control over the contract. Through an investment of $1,520, the speculator controls 1,000 barrels of oil. A small group of speculators, through leverage, control the world oil price.
A NYMEX document, "How the Exchange Works," boasts that it has nothing to do with oil production. "Yet the buying and selling on the Exchange occurs amid the winding streets of the oldest section of New York, with nary an oil well or copper mine in sight. In fact, many thousands of transactions conducted on the Exchange each day are accomplished without the participants ever seeing a gallon of heating oil."
As for London's (IPE), it has reported that its trade with Brent Crude oil contracts reached 375 million barrels in open-interest contracts on May 14, the highest level ever. This is about five times the total daily production of all sorts of oil worldwide. The daily turnover of Brent Crude future contracts at the IPE now approximates twice the global daily production of oil. But physical deliveries of Brent Crude, produced in 19 North Sea oil fields, are imploding. During the early 1990s, daily production of Brent Crude was about 700,000 barrels per day (bpd), but it fell to 570,000 bpd in 1999; 385,000 bpd in 2002, 327,000 bpd in 2003. According to the energy research firm Platts, it will sink further to 277,000 bpd this year. The outstanding amount of speculative Brent Crude futures on May 14 surpassed the daily physical production by a factor of 1,250.
In spite of the fact that Brent Crude now represents less than 0.4% of worldwide production, its "spot" price determines the price of 60% of global oil production.
Who is ADUSBEF ?
HISTORICAL VICTORY - SEIGNIORAGE - PUBLIC DEBT IS FRAUD
The following denunciation from part of the association of the consumers (Adusbef), based also on a study of the president of the Movement Solidarity Paul Raimondi, has been resumption from the Wall ßstreet Journal-HANDLE 12 November that title is:
OPINIONS 90% OF THE COUNCILS OF THE AGENCIES OF RATING ARE TRICKY !
Nine times on 10 the “councils” for the purchases or the sales from part of the true agencies of rating reveal "bufale", Adusbef denunciation.
The agencies of rating, been born to the beginnings of the 1900's in the United States, analyze to the solidity financial institution of subjects which states, agencies, governments, enterprises, banks, assurances. The main agencies are all Americans: Moody's, Standard & Poor's and Fitch.
RATING AGENCIES : THE MONOPOLY OF THE "THREE USA SISTERS"