OK, I am huge Chicago Cubs baseball and Indianapolis Colts football fan. As a Cubs fan I am used to disappointment, but as a Colts fan there are some fun wins and losses, and then are Patriot games. To say I dislike the Patriots, Tom Brady, and Bill Belichick is an understatement. I can honestly say I was hoping for a lifetime ban of Tom Brady, and that the NFL would make him forfeit all his records and the Patriots have to forfeit all their Super Bowl victories. But only a four game suspension? At least the NFL could have sat him for 5 games so the Colts don’t have to face him on his first game back!
Though Tom did not get the lifetime ban that myself and all of my fellow Colts fans were hoping for, he was punished none the less. So why are there consequences when athletes and normal everyday “Joe’s” like you and me do something wrong, yet there are no consequences when our oil market gets manipulated?
The oil market is nothing but one big rigged NFL game. Economics 101, high demand pushes up prices. The only problem is that demand is not real! Oil extended gains overnight after posting its strongest daily rise in weeks in the previous session, supported by bets that U.S. crude stockpiles will fall as demand would increase. On top of that yesterday, the EIA lowered its 2015 crude production growth estimate, while raising its forecast for U.S. oil demand, after OPEC raised its 2015 forecast of global oil demand to 1.18M barrels per day. The demand is not there! NYMEX traders are doing nothing but creating FAKE orders!
So look at the above chart. As of May 6th there are 383,780 orders of 1,000-barrel contracts for delivery to Cushing, Oklahoma in June. The problem with ordering 383,780,000 barrels of oil for delivery to Cushing is that they only have the capacity for 50,000,000 barrels of oil, and all the storage is full!
So what and why are traders doing this? In a nut shell by having open orders traders make demand look higher than it is and prices go up (this is a two way street, they can and do the same in reverse and make prices fall), again Econ 101.
Why do you care if Tom Brady has no air in his balls or traders create fake orders for oil? Well because your favorite team loses and you pay more for all your goods and services that are tied to the price of oil. Do you think Tom feels bad as he gets to relax on his Yacht next to his supermodel wife for the first 4 weeks of the season? Do you think NYMEX traders care if you pay a few buck more at the pump or at the grocery checkout line? Hell no.
So watch as those fake orders close without delivery by contract expiration on May 20th. Flaunting their flagrant disregard for the laws of supply and demand Traders will just roll their artificial demand to the next month and the cycle will start all over, just like Brady will pile up more wins after he comes back relaxed from his 4 week vacation.
So what do Tom Brady and the oil market have in common? They are both liars and cheaters.