Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

The Multi-Trillion Dollar Oil Market Swindle

Commodities / Crude Oil Jul 16, 2015 - 06:47 AM GMT

By: OilPrice_Com

Commodities In the past, I documented the overstatements by both the IEA and EIA in 2014 & 2015 in terms of supply, inventory and understatements of demand. Others also noticed these distortions and, whether intentional or not, they exist and they are very large in dollar terms. These distortions, which are affecting price through media hype and/or direct/indirect price manipulation, are quite possibly the largest in financial history.


Putting numbers behind it, with worldwide production running some 95 million barrels per day, and assuming $55 per barrel for oil, the market for crude oil is about $5.2 billion per day. Each $10/Barrel change is worth nearly $1 billion/day or $365 Billion/year for the worldwide crude oil market. Add the worldwide equity market caps of oil and oil related equities and debt you have a scandal that is in the trillions; a number that cannot be ignored.

According to Cornerstone Analytics, who have documented the IEA systematically underestimating demand in 2012-2013 only to revise it higher quarters if not years later, the EIA has created the appearance of an imbalance of supply by some 500 million barrels or $2.5 trillion in the last 5 quarters alone. This has easily swung oil by at least $20/barrel if not more.

I have maintained that oil should have corrected to around $70 in the fall of 2014, tied to U.S. production increases which at the time represented the price at which drillers would continue to add to supply. That price tied to cost reductions has probably been reduced to $60ish currently. But today, with the consensus oversupply widely quoted in the media as some 2 million barrels per day worldwide, it’s clear that if the numbers are correct below, the perceived oversupply wouldn’t exist at all. Suffice it to say prices would be at least at the point where production would need to be added, perhaps around $60-$70 per barrel, if not higher.

Assuming that number at $70 and with the blended average of WTI & Brent at $55/Barrel approximately, at $15/Barrel given the 95 million barrels of global production, then we can estimate that global oil markets are being undervalued by about $1.425 billion per day or over $500 billion per year.

Image URL: http://cdn.oilprice.com/images/tinymce/LEB1 ja.jpg

Furthermore, I don’t even take into account whether oil futures are being manipulated (much like FX, GOLD, LIBOR – all have been either accused of or been caught in rigging scandals) along with every other commodity as a result of oil’s collapse and its financial impact.

Why regulators, and especially the media, refuse to address this, even in theory, and instead choose to perpetuate the falsehood of oversupply is beyond me. In the last two months, E&P equities fell 10 weeks in a row, which hasn’t happened since 1989.

To answer our own question on why this entire event is being largely ignored, maybe that oil is thought to spur higher economic growth as suggested previously. But so far that has yet to even materialize as U.S. GDP growth has actually slowed, not accelerated. Only time will tell whether this exaggerated move in oil, as well as its volatility, is justified or not. As reported here, the EIA has already revised lower, though only slightly, its prior month’s production forecast as we predicted. Look for more of this to come.

Source: http://oilprice.com/Energy/Crude-Oil/The-Multi-Trillion-Dollar-Oil-Market-Swindle.html

By Leonard Brecken of Oilprice.com

© 2015 Copyright OilPrice.com - 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.

OilPrice.com Archive

© 2005-2018 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

6 Critical Money Making Rules