Best of the Week
Most Popular
1.U.S. Housing Bull Market Over? House Prices Trend Forecast Current State - Nadeem_Walayat
2.The Coming U.S. Economic Collapse Will Trigger a Revolution - Harry_Dent
3. Stock Market Crash a Historical Pattern? - Wim_Grommen
4.Global Panic - U.S. Federal Government Stockpiling Ammo – Here’s What We’re Going to Do - Shah Gilani
5.AI, Robotics, and the Future of Jobs - Aaron Smith
6.This is Your Economic Recovery With and Without Drugs - James_Quinn
7.Gold and Silver Price Getting Set To Explode Higher - Austin_Galt
8.The Something for Nothing Society - Lifecycle of Bureaucracy - Ty_Andros
9.Another Interesting Stock Market Juncture - Tony_Caldaro
10.Inflation vs the Deflationary Straw Man - Gary_Tanashian
Last 5 days
The Ultimate Demise Of The Euro Union - 1st Sep 14
Palladium Price Breaks Multi-Year High Over $900 - 1st Sep 14
When Complexity Becomes Chaos - 1st Sep 14
Designer War By Default - 1st Sep 14
Islamic State or Russia? Ten Key Questions Towards Pragmatism - 1st Sep 14
Mixed Emotions for the Gold Market - 1st Sep 14
These Clowns Are Dragging Us Into War with Russia - 1st Sep 14
Marx And The Capitalist Cancer Of Overproduction - 1st Sep 14
Scottish Banks Salivating at the Prospects for an Independent Scotland of 6 Million Debt Slaves - 1st Sep 14
Small Man Europe Is Now In “Effective State Of War” With Russia - 31st Aug 14
The Unintended Blowback Of False Flags - 31st Aug 14
Tesco Supermarket Death Spiral Latest Profits Warning and Dividend Slashed - 31st Aug 14
Dow, Gold and Silver - A Last Stand, A Fake Out And A Surge - 31st Aug 14
If U.S. Consumers are so Confident Why aren't They Spending? - 31st Aug 14
Scotland Independence House Prices Crash, Deflationary Debt Death Spiral - 31st Aug 14
Obama’s “Catastrophic Defeat” in Ukraine - 30th Aug 14
Stock Market Inflection Point Approaching - 30th Aug 14
Gold And Silver - Elite's NWO Losing Traction. Expect More War - 30th Aug 14
Corporations Join Droves of Americans Renouncing US Citizenship - 30th Aug 14
Peter Schiff U.S. Housing Market, House Prices Bubble Warning - 30th Aug 14
Russia, Ukraine War - It’s Time to Play the “Gazprom Card” - 29th Aug 14
The One Tech Stock Investment You Should Never Sell - 29th Aug 14
Bitcoin Price $500 as Current Downside Barrier - 29th Aug 14
Don't Get Ruined by These 10 Popular Stock Market Investment Myths - 29th Aug 14
Low Cost Transcontinental Gold - 29th Aug 14
Gold Bullish Central Banks Should Give Money Directly To The People - Helicopter Janet? - 29th Aug 14
US House Prices Bull Market Over? Trend Forecast Video - 29th Aug 14
The Fed Meeting at Jackson Hole Exposed Yellen’s Greatest Weakness - 29th Aug 14
AAPL Apple Stock About To Get sMACked - 29th Aug 14
A History of Unlimited Money: Learn From It or Repeat Its Mistakes - 29th Aug 14
How You Can Play to Win When Market Makers Are Calling the Shots - 28th Aug 14
EU Gas Supply Is In Real And Imminent Danger - 28th Aug 14
Central Banks at the Root of Evil - 28th Aug 14
European Bond Market: Bubble of all Bubbles! - 28th Aug 14
Employers Aren’t Just Whining: The “Skills Gap” Is Real - 28th Aug 14
The ISIS Menace - Just What We Need, Another War - 27th Aug 14
The Risky Business of Methane-Rich “Fire Ice” - 27th Aug 14
CFR Recommends Policy Shift that is Very Bullish for Gold - 27th Aug 14
Ukraine Standoff Signals Global Power Shift - 27th Aug 14
Stock Market Panic Decline Begins - 27th Aug 14
The Monopoly of the Government Education Cartel - 27th Aug 14
How to Invest in Silver Today for Double-Digit Gains - 27th Aug 14
The Big Solar Energy Breakthrough We've Been Waiting For - 27th Aug 14
U.S. Empire’s Bumpy Ride - 27th Aug 14
Gold Market and the Interest Rate Trap - 27th Aug 14
Stock Market Staring Into the Great Abyss - 27th Aug 14
A Look at the Coming 30-year Inflation Cycle - 27th Aug 14
Forex Trading - Will USD/CHF Rally Above 0.9200? - 27th Aug 14
Europe’s Depressing Economy Dog Days of Summer - 27th Aug 14
How The Coming Silver Price Bubble Will Develop - 26th Aug 14
A Nation of Shopkeepers - Supply-Side (Voodoo) Economics? - 26th Aug 14
Stock Market Bear Tracks Abound In Wall Street - 26th Aug 14
65,000 U.S. Marines Hold up a Mirror to the Economy - 26th Aug 14
Bitcoin Market Provides Clues for Investors - 26th Aug 14
The Key to Trading Success - 26th Aug 14
Will The US Succeed in Breaking Russia to Maintain Dollar Hegemony?... - 26th Aug 14
Even Mainstream Academia Worried about Massive Bubbles in Markets - 26th Aug 14
Iraq and Syria Follow Lebanon's Precedent - 26th Aug 14
Colonization by Bankruptcy: The High-stakes Chess Match for Argentina - 26th Aug 14
Dow Stock Index On The Cusp - 26th Aug 14
Prohibition Laws and Agency Regulations - 26th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

U.S. Strategic Petroleum Reserves: The New Monetary Tool?

Commodities / Crude Oil Sep 05, 2012 - 02:06 AM GMT

By: EconMatters

Commodities

Best Financial Markets Analysis ArticleOil and commodities are rising with renewed talk of buying bonds in Europe and future stimulus from the Federal Reserve in the United States. The problem of course is that higher oil prices partially offsets some of the benefits of these Monetary Initiatives by leaders (It is debatable how effective these policies actually are in solving the real issues and problems).


One of Europe`s biggest problems is lack of actual growth in the Euro zone, and this means that they really cannot grow their way out of their vast debt troubles. It sure cannot help that much of Europe is paying $12 a gallon for gas. No wonder their economies are in trouble.

The way European economies are set up with regard to slow growth, mature countries with little innovation, high taxes, and even higher government spending commitments means the numbers just don`t add up. Europe could start from scratch with all debt forgiven and they would be right back where they are now in less than 10 years because the numbers just don`t add up. Until the numbers start to make sense all these monetary initiatives are just temporary stop gaps which actually make the numbers problem worse.

But since everything seems to be managed these days, and all markets are correlated globally with electronic trading and sophisticated trading algos, central governments might as well be in charge of the actual commodities they are juicing. Because in effect their policies are managing these commodities prices, from corn to gold, from gasoline futures to silver prices as it is all the same trade in the market`s perspective.

So why not let these central governments manage the outright commodities just like OPEC? ECB starts bond buying program, dumps a bunch of oil on the market to offset the negative side effects of their programs. The Fed starts QE3, dumps a bunch of Oil on the market at the same time so Oil prices don`t rise with the stock market on QE3.

Do these SPR releases work? Heck yeah, just ask all those traders who lost money last year when WTI went from $115 a barrel to $94 in 24 hours on the rumor behind the scenes that the SPR releases were being coordinated (this is long before the actual news when the price dropped about $7 dollars a barrel).

By the time the SPR releases were actually announced all the big players had already priced this event into the markets. The real damage came before the actual announcement as like most things on Wall Street inside information runs rampant when so much money is involved.

Can you imagine how valuable that information was that got leaked to the big players that there was going to be a large coordinated release of the SPR`s? Now you are not naive enough to think that the magical $20 drop in Oil prices over that 2 day period was just natural markets at work do you? So yes, SPR releases do in fact work!

Oil markets like most commodities are momentum based, and besides the immediate additional supply on the market and the drop in futures prices as longs get screwed and have to dump positions is the psychological factor that at any time the Government can come in and “manage” the market. It is hard to get too much momentum going under those circumstances. In effect, sort of like OPEC manipulates….I mean “manages” prices.

Why not set a target and then trader`s will know exactly where they can push the price of oil before getting out? Is it any different than the Swiss targeting a level in their currency or China for that matter? If the ECB is going to target an interest rate for Spanish Bond Yields on the 10-Year, why not set actual targets for Oil as well?

For example, target WTI at no higher than $90 or $95 a barrel and Brent at $105 to $110, and then Central Governments wouldn`t even actually have to release any Oil as they could just set the targets and markets would do the work for them assuming no actual supply shortages in the market. Which by the way has actually been the case for the last 5 years based upon conservative analysis of the EIA data, i.e., there has been no supply shortages despite the price fluctuations with all oil inventories well above average supply levels during this period.

Really, since Finance ministers are in effect “Managing “ oil prices as a byproduct of their actions anyway just give them one more tool for their policy initiatives in letting them manage the releases of the SPR`s as well.

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2012 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014