Why the surprise oil release? "It’s about chasing oil speculators out of the market."

[Pirate Smile]

Surprise Oil Release: Stroke of Genius or Terrible Mistake?

On Thursday, traders on the floor were divided over what the sudden and unexpected release of 60 million barrels from the strategic petroleum reserves of 28 nations signaled for the days ahead.

Some pros were irate and seriously concerned that recent actions were a dangerous sign that Western leaders truly don’t understand how the economy works.

-snip-
Stroke of Genius?

OptionMonster Jon Najarian sees the situation very differently. In fact, he suggests the oil release was a stroke of genius. Najarian thinks the Western world just skewered speculators that were artificially driving oil higher – and that’s a positive no matter how you slice it.

Speculators had been accumulating positions for a variety of reasons that had nothing to do with the supply and demand dynamic, he explains. But after the IEA's release, for the speculators "now it’s like dealing with a crazy man. They’ll stop doing it and crude will again start trading on demand,” he says.

http://www.cnbc.com/id/43511000/

IEA targets oil speculators

LONDON, June 23 (Reuters) - The International Energy Agency's (IEA) decision to release 60 million barrels of crude oil from strategic reserves is intended to drive speculators out of the market and resist the formation of a bubble by breaking expectations about near-term supply shortages, rather than target OPEC.

While the intervention will be intensely controversial, especially in the industry and among hedge funds and others running long positions in crude futures and options, it can be presented as a relatively limited move in response to fears about a shortage of specific grades of crude over a short time window, smoothing the process of adjustment.

-snip-
PHILOSOPHICAL SHIFT

The suspicion is that the decision to order the release reflects a change of personnel and philosophy -- particularly at the White House. President George W Bush and his energy advisers took a strongly pro-market orientation and were content to allow price rises to force demand rationing and rebalance the market. President Barack Obama appears much more inclined to intervene.

The president has already made clear he believes speculators are to blame for exacerbating the recent price rise. Policymakers have noted the record long positions in crude futures and options built up by hedge funds and other speculators, according to data published by the U.S. Commodity Futures Trading Commission.

http://www.reuters.com/article/2011/06/23/column-iea-oil-release-idUSLDE75M1H020110623

The Obama Administration also made it clear that they might do it again so this isn't just a one-time occurrence. That means the speculators can't assume they can just run the prices up again. They know the Obama Administration may come in and cut their legs out from under them.




I'm expecting to hear more Hedge Fund Big Wigs saying Obama is like Hitler invading Poland!!!

[msongs]

1. a temporary fix in the absence of long term planning and strategy nt

[Peacetrain]

4. if we can't get the congress to act on it.. I will take almost anything

including a temporary fix to back those hell hounds of the markets down.

[polichick]

2. Smart to use all the tools in the toolbox!

[ProSense]

3. It's

obviously part of a strategy.

Obama says new task force will examine gas prices (April)

CFTC Chairman: 90 Percent Of Bets On Rising Oil Prices Come From Speculators (June)

[Lint Head]

5. Bankruptcy is too good for the oil speculators.

The price of oil is the thing that ignited the last economic breakdown.
All one has to do is follow the time line. The price of a barrel of oil skyrocketed just months before the downturn.
The price of oil impacts groceries, vacations, dry goods, car prices and real estate prices to mention a few.
The cost of transporting goods and travel to and from work and vacation increases. If no one travels they don't spend.
Moving anything costs more with increased gas prices. The high price of oil should not be used as a reason to go battery powered or solar.
The fact that our environment is dying is reason enough. If gas goes down oil companies could go out of business and electricity would be the alternative. I say good.

[CaliforniaPeggy]

12. You're spot on. Thank you...nt

[Pirate Smile]

6. kick

[DrToast]

7. Oh, boo hoo!

”It demonstrates a complete lack of understanding of how the economy and of how the markets work,” says outraged Fast trader Brian Kelly. “All it did was create panic.”

You know what panic is? Panic is trying to decide between filling your gas tank and buying food because some clowns have nothing better to do than gamble on commodities.

[alcibiades_mystery]

8. It's good that it created panic...they should create panic among the speculators

every few weeks, at completely unexpected times.

[Hippie Puncher]

9. Long-term strategy at its finest. Pure Obama.

[saras]

10. not a one-time occurrence? interesting.

You could almost consider it a free-market response to speculation. While in a sense the interventions are precisely timed, in another they are adding a random element to manipulable trends to make them less predictable, and hence less profitable. It's a way to decrease speculation without actually passing laws against it or otherwise restricting it. Note that the more long-term your goals as an investor, the less effect it has on you. You can still profit from long-term increases or decreases.

[Tarheel_Dem]

11. Rec.

:kick: