The price of oil is a conspiracy of bankers
Beginning of the new year was accompanied by a record fall in the index and prices in financial and commodity markets. New records recorded in the oil market. For the period from July 2014 to end of 2015 the price of this energy resource has decreased by 70 %.
It would seem, any longer, and yet last week, oil prices dropped more than 10 %, having endured the worst start to the year for all time of conducting statistics.
Traders are increasingly inclined to believe that prices could fall below $ 30 per barrel.
The statistics of Bloomberg, based on a synthetic indicator of the World Oil &Gas Index shows that during the first week of the new year, 60 of the largest oil companies in the world for falling of the prices suffered losses of around $ 100 billion. Royal Dutch Shell Plc, the largest oil company of Europe, lost 5.7% according to Bloomberg, BG Group and 6.4% respectively. Sinopec, the largest refining company in Asia, lost to Bloomberg 7.6%, and PetroChina Co., the second largest oil company in the world, is 6.8%.
A lively discussion of the reasons for the unprecedented fall in the price of black gold goes a long time. Fewer still those the old fashioned way believes that this decline is the result of “natural” changes in market conditions. They say that the demand for oil became more and more detached from his proposals, and backlog, in turn, caused attenuation of economic activity in most countries of the world. Indeed, the attenuation observed, but it changes the balance of supply and demand in the magnitude of several percentage points, whereas falling prices are measured times.
Often as the cause of the collapse of prices on the world market is called the Saudi move. Indeed, it unilaterally (without the coordination within OPEC) increased oil production by embarking on the path of oil dumping in an attempt to win the position of master of the world market of black gold. This may explain the decline in world prices by several dollars per barrel, but the overall magnitude of the fall (if you count from the peak reached in 2008) was about $ 100 per barrel. And if you count from the average price in 2014 is nearly $ 100 (mark Brent), fall towards the beginning of 2016 is nearly $ 70 per barrel. Such buildup market only all major oil-producing countries (OPEC plus Russia, plus another two or three States).
Factor in OPEC, the organization, which is called the oil cartel, today almost none of the serious experts does not consider as significant. Of course, there is a suspicion that the oil market is manipulated. One of the traditional methods of manipulating any market — creation of inventory. The oil reserves under the guise of strategic reserves form, many countries, primarily the United States. Sales of inventory may lower prices. There were sales and reserves of the United States, but the effect of such sales is very short, and price variance in this case was no more than a few dollars per barrel.
In the last days of 2015 in media appeared a series of publications explaining the sharp fluctuations in the oil market the actions of the banking cartel. One of the first was an article by an American financial expert Michael McDonald, which stated that OPEC does not control the market of black gold, and controls the market the banking cartel is using as a tool in energy loans to companies in the oil industry and other energy sectors. According to McDonald, the total amount of outstanding loans in the energy sector of the United States (oil and gas industry) is 4 trillion. $ . The American banks of this volume has provided approximately 45% of the loans, 30% — foreign banks, 25% from non-Bank institutions such as hedge funds. According for the III quarter of 2015, Citigroup in the balance sheet was $ 22 billion. energy loans, JP Morgan Chase 44 billion, Bank of America and 22 billion Wells Fargo — $ 17 billion.
With the first output of the MacDonald can agree: do OPEC no longer controls the oil market. We can agree also with the fact that the market began to control the banks, organized in a cartel. Questionable conclusion about what management tool are the energy credits.
Sam MacDonald cites that put this conclusion into question. The author says that the energy loans make up only 3% of the total size of the credit market of the United States. The proportion of energy loans in the credit portfolios of individual American banks are as follows (%): Citigroup is 6.1; JP Morgan Chase — 5,6;
Bank of America — 2,5; Wells Fargo is 1.9. Not enough to create major changes in the oil market and other energy resources. Obviously, that energy is not the main priority of the credit policy of the banks in Wall Street. Hypothetically, Bank loans can become a tool for achieving long-term structural policies. It was on this hint, some experts saying the drop in oil prices for too long. Such conclusions, however, should be backed by statistics of investment in the development of alternative energy, displacing oil, but there is no evidence. Banks, at least, have not increased in recent years, how-ever significantly the financing of projects of the same green energy
This suggests that the drop in prices of black gold is the result of price manipulation. Bank loans cannot serve as a tool of manipulation. Loans, of course, have an impact on prices, but the effect of the loan occurs with a time lag of several years. And manipulation creates the price effect immediately or max in a few weeks.
MacDonald argues that banks have limited the financing of the oil industry last year and will probably continue to do so in 2016. But then it can be expected that, on the contrary, there will be an increase in prices for black gold, as credit constraints will reduce the supply of oil.
The manipulators of the oil market — the largest banks. They do this by using futures contracts on oil and other derivative instruments (derivatives) tied to oil. Paradoxically, but prices for the current day (spot transactions) are determined by the prices of future supplies (for example, a year).
And future (futures) prices are formed in the so-called expectations. “Expectations”, in turn, are created by the rating agencies, the expert community and the media. All of them are controlled by the largest banks. Banks simply bought the “right” expectations.
Since the late 70-ies of the twentieth century the world began to dynamically develop the market for “paper oil”, i.e. futures that don’t end with the physical supply of oil. It’s gambling speculators, which greatly affects all who are engaged in the production, processing and use of oil and oil products in the real sector of the economy. Today the market turnover of “paper oil” is ten times higher than the turnover of the market of physical oil. The trading volume of oil futures contracts on two major exchanges — the new York NYMEX and London’s ICE — already more than 10 times higher than the annual oil consumption in the world.
All the markets in financial derivative instruments (derivatives) are controlled by banks. First of all, Wall Street banks and some major banks in the city of London and continental Europe. The market for “paper oil” — is no exception. According to the calculations of the IMEMO ran, 95% of the world market of oil derivatives is controlled by US banks.
The largest holders of positions in the oil derivatives are Goldman Sachs, J. P. Morgan Chase and other banking giants that use oil futures, first, to profit from fluctuations in oil prices; secondly, to ensure that their activities as financial intermediaries. While customers of banks are the players of the physical market of oil, oil companies, refineries, airlines, etc., and financial players, including hedge funds. To increase the commercial effect of its monopoly position in the market for “paper oil”, many giant banks did not disdain even to engage in trading physical oil (obviously, when planning the price of black gold, these banks have an advantage over players of the so-called free market). In 2003, the fed allowed banks to act as commodity traders. In the trading of physical crude oil plunged J. P. Morgan, Morgan Stanley, Barclays, Goldman Sachs and Citigroup and several other major banks.
The financial crisis of 2007–2009 was triggered largely for the reason that out-of-control financial regulators were the markets for financial derivatives, where the frolicked in the American banking giants. The U.S. Federal reserve, the securities and exchange Commission of the United States, the U.S. Department of justice, the European financial regulators have tried to restore basic order in derivatives markets. In 2010 in the US, a law was passed Dodd-Frank, which outlined the direction of tightening regulation of the financial market, but the act is a framework for the practical applications required to take a large number of specific laws and regulations.
In the United States for several years an investigation of the activities of banks, Wall Street and major European banks before and during the crisis of 2007–2009, In particular, was identified when banking operations in the markets of oil futures and their transactions with the physical oil. In 2012, began an investigation of the activities of banks Goldman Sachs, Morgan Stanley and J. P. Morgan to manipulate commodity prices (including oil), and in 2014 listed banks was charged with unfounded accusations.
While most of the largest banks were and remain in markets for financial derivatives. Including the oil futures market. Therefore, we must be prepared for the fact that “the market” oil will continue to do various circus tricks.