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“Did Authorities Do Enough To Find Out Why Oil Prices Went Negative?” By Irina Slav – Nov 26th

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We all should take note of this article by Irina Slav:   if 'vote counts' can be tampered with, why not oil prices...or vice versa...

"Did Authorities Do Enough To Find Out Why Oil Prices Went Negative?"

By Irina Slav - Nov 26, 2020, 7:00 PM CST

In late April this year, Wet Texas Intermediate nosedived below zero, sending the market into a frenzy. The frenzy ended a day later when WTI rebounded to positive territory. Now, the Commodity Futures Trading Commission has issued a report on the unprecedented event. Still, it has failed to answer many questions. The report identified three fundamental factors and five technical factors that contributed to the slump in the U.S. oil benchmark. Among the fundamental ones, the CFTC identified the excess supply on global oil markets, which fused with the unprecedented demand loss resulting from the pandemic-prompted lockdowns and worries about a lack of oil storage space.

Among the technical factors, the CFTC noted the much higher-than-usual open interest in WTI near the expiry date for the May contract and a decline in the liquidity of this contract. The authority noted that on April 20, the day when WTI fell below zero, exchange-based control mechanisms had been triggered, but even they had not been enough to stymie the drop.

“In summary, a variety of factors coincided leading up to, on, and around April 20, when WTI Contract prices fell from $17.73 per barrel at the beginning of the trading session to finally settle at -$37.63 per barrel,” the CFTC said. “An oversupplied global oil market faced an unprecedented reduction in demand due to COVID-19 slowdowns and shutdowns, and the uncertainty over supply, demand, and storage capacity coincided with price volatility in the WTI Contract observed at historic levels that day.”

Not everyone is happy with this summary, however. Reuters’ John Kemp, for instance, suggested the behavior of one or more traders may have contributed to the excessive volatility of the U.S. benchmark oil contract.

“If trading added to volatility, how significant was the contribution?” Kemp wrote. “Was the behaviour culpable? If it was not culpable, should it have been? And should either the contract’s design or supervision be changed to prevent a repetition?”

Members of the CFTC are not all satisfied with the findings of the report, either. In comments on the release of the document, Commissioner Dan M. Berkowitz said:

“The Report issued today is incomplete and inadequate. The Report fails to determine the cause of the unprecedented plunge in the price of the WTI futures contract and divergence from physical markets on April 20, the penultimate day of trading in the May contract.  Rather, it provides a general recitation of economic conditions in the weeks and days leading up to April 20, and offers only aggregated statistics regarding trading on that day.  Unfortunately, this Report does not provide the public with an adequate explanation for the extraordinary price collapse on April 20.”

These questions may never get answers. The report, although titled interim, will not have a follow-up, according to the CFTC. What’s more, it expressly states that its scope does not include trading activity:

“This Report does not analyze the propriety of trading by any particular trader or group of traders. Additionally, to the extent any trading activity may have been abusive, manipulative, disruptive, or otherwise unlawful, an evaluation of that activity is beyond the scope of this Report.”

Will we ever find out exactly what happened on April 20, besides the obvious? The question remains open, as does the possibility that regulators are looking into the trading aspect of events. As the CFTC put it in a footnote: “As is customary, nothing in this Report should be interpreted to either confirm or deny the existence of an enforcement investigation by the Commission related to the matters addressed herein.”

As to whether a repeat of the events from April 20 is possible, there are two ways of looking at it. One, anything is possible, and if it has happened once, a second occurrence becomes more likely unless something in the context of this event changes. Two, the convergence of fundamental factors in April was unprecedented. A repeat of this combination—and mostly the element of surprise it carried—is quite unlikely. So, although hyper volatility in oil markets always remains a possibility, another nosedive by WTI to almost -$40 per barrel is quite improbable, even without tweaks to how commodity futures are traded.

By Irina Slav for

Edited by Tom Nolan
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Irina Slav mentions John Kemp.

John Kemp sounded the alarm in February 2017 with his article...

Column: Oil becoming a crowded trade as hedge funds pile in

LONDON (Reuters) - Hedge funds have accumulated a record bullish position in crude futures and options, betting on further price rises, but the lopsided nature of the positioning has become a key source of risk in the oil markets.

Hedge funds and other money managers had accumulated a record net long position in the three main Brent and West Texas Intermediate (WTI) futures and options contracts equivalent to 885 million barrels by Jan. 31 (

Fund managers added an extra 41 million barrels to their net long position in the seven days to Jan. 31, according to the latest reports published by regulators and exchanges.

Funds now have long positions equivalent to almost 1 billion barrels across the three major contracts, while short positions amount to just 111 million barrels.

The ratio of long to short positions has reached almost 9:1, the most bullish since May 2014, when Islamic State fighters were racing across northern Iraq and the Libyan civil war had halted crude exports (

The crude market is starting to resemble the classic crowded trade in which speculators attempt to position themselves in the same direction in anticipation of a big price move.

There has been no sign of profit-taking although Brent prices have risen close to the $55-60 region most energy market professionals expect to be the average for 2017.

Hedge funds have continued to add long positions even though Brent prices have almost doubled over the last 12 months and are trading near the highest level since July 2015.

And there is no evidence of any new wave of short sales. Combined short positions across Brent and WTI have fallen to the lowest level in seven months.

Fund managers apparently believe output reductions by the Organization of the Petroleum Exporting Countries and other exporters will succeed in draining excess global inventories and pushing prices higher.

Managers are also discounting the threat from renewed drilling in the United States and a likely increase in output from shale producers, at least in the near term.

But every successful trade needs an exit strategy and in this case it remains unclear how and at what price fund managers will manage down positions and try to take profits.

The enormous concentration of hedge fund long positions has emerged as an important source of price risk in the near term (“Predatory trading and crowded exits”, Clunie, 2010).

One-way markets, when traders attempt to position themselves in the same direction, often precede sharp reversals in prices (“Why stock markets crash: critical events in complex financial systems”, Sornette, 2003).

The previous record net long position in oil markets, set in June 2014, preceded the deepest and most prolonged slump in prices for almost 20 years (

And in the last two years, large concentrations of short positions have normally preceded a sharp short-covering rally as managers raced to lock in profits when prices stopped falling.

With so many fund managers now positioned in the same (long) direction, the risk of a rush for the exits, a disorderly liquidation of positions and a correction in prices has risen significantly (

(John Kemp is a Reuters market analyst. The views expressed are his own.)


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Oil, like gold and silver, are "rigged" and often manipulated markets full of derivatives.  This year we have seen big banks get fined huge sums (more than a billion dollars) for getting caught and prosecuted manipulation the market.  - 2016


…This means on that day 123 “futures market” barrels were traded for every barrel produced…. On just one exchange.

Why Oil Prices Will Rise More And Sooner Than Most Believe

By David Yager - Sep 25, 2016, 6:00 PM CDT

A few excerpts

... As happens every day when any news one way or another is released, oil markets responded and WTI moved. In this case it fell. .. The problem with the Goldman prognosis is oil markets today look nothing like they did in the early 1990s. ...

... because making money trading is, at least volumetrically, a much bigger business than finding and producing the product. The Chicago Mercantile Exchange (CME) brags, “Trade Light Sweet Crude Oil (WTI), the world’s most actively traded energy product”. And trade they do. On February 10, 2016 the CME alone (other exchanges also trade WTI) traded a record 1,609,771 WTI contracts of 1,000 barrels each. That day 1.6 billion “dry barrels” were traded while actual North America production, which is priced off WTI, was less than 13 million “wet barrels” of actual oil. This means on that day 123 “futures market” barrels were traded for every barrel produced. On just the CME. ..


The weekly reports from the U.S. Commodity Future Trading Commission, where traders disclose their activity, show the wagers are both long and short. That’s what hedge funds do. But even a change in the number of futures on either side of the trade is now newsworthy as to whether the dry barrel speculators think oil will go up or down. This is called “market sentiment”, something entirely different than actual oil market performance.

That futures trading was invented so producers could lock in a stable future cash flow is long forgotten. After all, they only hedge the wet barrels they believe they will produce, a tiny fraction of the activity in modern commodities...

... The textbook definition of free markets, religiously recited by defenders, is that at some point commodity prices should reflect replacement cost. In reality this is a number the posted oil price only passes through one direction or the other every few years. Today a 95 million b/d market trades on the tiniest marginal barrels that often don’t even exist yet. Like when WTI drops because three more rigs drilling in West Texas may add 1,500 b/d of production in two months. ..

..volatility is not only assured but required.

By David Yager for


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What about oil that is actually delivered?

“…It is estimated that typically 4% or LESS is actually delivered. A contract may be bought and sold many times before the delivery date as businesses attempt to manage their risk. This is what accounts for the large volume traded, though relatively little is delivered…”

(I would bet that it is much less than 4% in this era)

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Have to try and read, its hard with my understanding since its a difficult topic but I thought the reason was always clear and why THAT day?! Last day where contracts for physical delivery in the following calender month (May) were traded?! I knew when in very early March the public life went down to a never known minimum after you could see a typical 1.0 - 2.0-times the incubation-time for each larger area, the few first positive tested were all having a connection to China/Asia or much more often were in northern Italy in the cool mountain region where some kind of Ski tourism is no problem in mid- and late February... they brought the virus than everywhere, I had a theory for the US which later proofed to be deadly correct, I guess illegals ofc not having an insurance and maybe some of the newer/younger ones simply being so afraid that here the weakness of the US health system kicked in hard... also the rules, wear mask in Region A, no need in B, and in C only masks and no in D they measured fever before you could enter a restaurant or stay for your meal, but no masc here!

That oil contract went into its last trading days while within days the virus showed what happens in high populated areas and when death persons, also "old" people were tested there, the numbers in many countries in the middle and lower income/GDP group with some countries like Bangladesh, with the double German population but just in an small area which is some large pieces of land away from the half german area... resulting in a country-wide density (at least before the virus, their statistics are a, bad, joke...) of over 1,100 persons per km² and closer to 1,125 than 1,100... that is already a density for urban areas for all of the ~165 million residents at home, also its a major "source" for cheap workers for the Middle East or other areas, families and some people above the absolute and relative poverty line are only there because workers for example in the UAE live under very bad conditions and work only to leave at some point, now and during early summer alone in arab/muslim countries being large oil and gas exporters and for Dubai/Abu Dhabi also a very good location, more or less central to most larger land area its a good place to reduce costs for airlines, also cheap oil (= fuel) can't be closer/cheaper, than in the Arabian/Middle Eastern peninsula...

In April already lockdowns which were active (China is no thing, if the country says to stay home the cities only need very few patrouls and cities look during the day like ghost cities, only with evening/night light over 1.4 billion (some "pop clocks" count or did before closer or above 1.45 billion.... Europe and US people maybe thought the USA are special and they won't need lockdown or suffer (physical and economy), but smarter people knew it and who knew what will be in during May and in late May?! The oil some bought for few cents per barrel was real, not taking it contained heavy penalties or so I guess, only people which thought "158.98 liters of light oil for less than 10, later 5 US-CENTS can't be who bought for like 4-5k US-$ at extreme low price had a account balance of over 9 million not long later... just a deficit/debt!

These who didn't buy May or 2nd May half fuel/oil than entered again the next day(s) at least smaller amounts cheap, demand for ultra cheap oil/fuel was great until the price went into a normal area of at least between a few and up to 10 US-$ per barrel...?!

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It's a manipulated market, without a doubt. Real refiners never buy on the spot market, but everyone pays attention to it. The hedge funds (leveraged to the hilt) can push the price up or down at will, while the oil companies can't compete, they're too busy producing real value. 


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Yea I mean I have no car, its better with the medication I get but I really as a "Berliner" ;) never wanted... you are faster in the City with U-Bahn (Metro) and S-Bahn ("City Train", only in the center a larger number of stations is in tunnels, but I think it doesn't go really deep, you also feel it when you enter these stations), and living/growing up in (former) West-Berlin only ~400-500m away from the former Berlin-Brandenburg area you still had/have a very great bus connection as I visit my mother regularly to help her as her friend something like my "step father" (not in law) needs care, and I even get paid for it, didn't know at the start and didn't care but once a woman from "Malteser" (the group which helps) was there and said I could do it as a "honorary volunteer" (I think this word 1:1 doesn't exist in UK/US) which is no work and now in 2021 you can even have 3000€/year tax free as "expense allowance" and other incomes, and tax free also means that the money the state pays for my living, flat (and okay I'm a special case living in a project for methadone or opioid substitution patients in living projects or in own flats, they support you, thats paid seperate, but for all this that "income" doesn't matter, and I get between 130 and 150€ per month for helping my mom... lucky the woman was there when I came to help! 

However here a "Metrobus" connects this remote area 24/7 with the city... and the "BVG" is the company which operates most things, even the ferrys (to visit the Peacook Island, without extra payment or so for the ferry), but going back to times before the Nazi Party, I think to "Kaisers"-Time the "S-Bahn" is operated by "Deutsche Bahn", the real German railway company which was for most of the last over 125 years or more state-owned and later existed twice I guess, in the east and west, during WW2 it was "Reichsbahn", this created a situation that they only made 1 complete starting Metro-Line from the East (From the later build "Fernsehturm" to an location which was a bit outside Berlin, later they corrected it, but it went through the whole East, the others only had small parts before the wall seperated them, now the U5 after so many years in this damn Corona year just 3 weeks ago or so was reopened from Central Train station to the "Fernsehturm" (the ~365m tower in the center with a restaurant in the round ball-like thing which rotates with 360° per hour), the rest of East-Berlin still has very much S-Bahn and TRAM is a thing that is almost only "east"-exclusive, a few lines, very few, I think 2 or so, got less than a hand full new stations into the west, in one case its because it drives now right to a hospital, and the other are also very short ones, as I'm not the only one who doesn't like TRAM I think, they might be a good thing between bus and metro/s-bahn but their rails even if cars can still cross the area, are destroying the style of streets imho and I don't like the east... strange as I was born in 1987 but in the 1990's and early 2000's you really lived in 2 cities... and still you do, had a few appointsments in a hospital deep in the east and had to drive very far east with the s-bahn and than TRAM back westwards a bit, it did look more like Warsaw or Sczezin... I have the Polish citizenship since I was born and 2011 I became the German and since than I even dont know where my 2014 expired Polish Passport is^^ 

Really Berlin is great, almost everyone driving public transport says this, and maybe except New York and L.A. I think no City can compete with that in the US and even L.A. doesn't I think, in New York the much higher pop. density is a bonus but especially busses, TRAM, and night service can compete with such dream cities like NYC... 

Me as a "poor" guy receiving help from the state, I drive for 27,50€ per month with everything... a few €uros more for an "ABC"-Card and I could use the parts where the "VBB" drives outside of Berlin, like the new Airport which opened 9 years to late and is in Brandenburg (like the former Schönefeld Airport), ofc its much more expensive for normal workers or tourists but its really great, and with gasoline being so important, same for petrochemicals etc... its heavy how some people used all their savings to buy 1000 liters of crude oil for less than 1 US-$ because I mean how can it be wrong to buy over 10 Liters of oil for 1 US-Cent?!?! Even if refined and sold for only 1 US-$ it would be 10 US-Cent per liter... but instead of big money they were ripped off, on the other side I dont know if I like the "new"  rules introduced in the early 2000's that much more oil than is being every produced can be traded and speculated with...

but a real look, and I mean a REAL intensive, at the history of oil and "Peak oil Drama" and todays oil reserves, SPR's, oil storages, oil price and the same thing for the last years... back to 1960 or even 1945 or before WW2... I mean Iran, Venezuela, Libya and smaller producers like Syria "missing" (ok Libya has its comeback for a while...), historic cuts and still far away from shortage but still some people "fear" Peak Oil ... I mean you have to be blind to think that don't you?! 

Btw someone knows anything about Oman trying to sell its oil block with huge parts of its oil and natural gas reserves? It would be the first Middle Eastern state to make such a "Reserves vs Cash/Contract"-sell or?! If a REAL large reserves country would do it, it could be the beginning of the end, or?! As long as the Oil/Gas-Lobby is willing to buy that immediately the damage can be minimized, but if it gets too much, like Qatar selling like 10 Trillion m³ of Gas and a few billion barrels of oil/gas condensate together with UAE and Kuwait selling each like 10 to 15 billion barrels?! Would be a serious situation... but I think for medication and chemicals the "petrochemical" industry will not switch that fast from oil to... lets say gas? or not more/faster than before? Its still part, more or less, in most of our medications, often from the capsule to the active substance... same fertilizers? I remember that the natural materials to easy/cheap produce fertilizers are pretty low in reserves with last reserves had been in Morocco, "Western Sahara" like 15 years ago and the rest a bit from here and there and rest coming from Oil and Natural gas?!


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