Thursday, August 21, 2008

Vitol At One Point Held 11% Of All Nymex Oil Contracts

A single energy conglomerate held 11 percent of all contracts on the New York Mercantile Exchange at one point last month, according to a story out of WaPo.

The Commodity Futures Trading Commission made an unusual request last month for data from Vitol Group, a private Swiss energy company that regulators thought was helping industrial firms get the oil they needed.

The commission discovered, however, that the Vitol would be better described as a speculator for its own account , trading oil contracts to turn profits rather than assisting companies that actually needed oil delivered for their operations.

The commission investigation showed Vitol was one of the most active traders of oil on Nymex as prices reached record levels.

By June 6, Vitol had amassed contracts equal to 57.7 million barrels of oil, about three times the amount the United States consumes daily. On that day, the price for a barrel of oil spiked $11 to settle at $138.54, per barrel, valuing Vitol's oil holding at nearly $8 billion.

Interestingly, the CFTC issued a statement in response to the WaPo story saying:

To date, the CFTC has found that supply and demand fundamentals offer the best
explanation for the systematic rise in oil prices. Regardless of their classification . . . the CFTC's market surveillance group scrutinizes daily the positions of all large traders, both commercial and non-commercial, to guard against market manipulation.

Hmm, the CFTC may actually have staff members that understand how markets work and that the chance Vitol "controls" the oil market is slim to none.

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