Two of the world's largest energy exchanges have forced traders to deposit significantly more money when investing to curb volatility in energy markets and drive out speculators.
The exchanges and related clearing houses have found themselves at the centre of the growing storm over claims that speculators have been behind the recent rise in oil prices to record levels.
The New York Mercantile Exchange (Nymex) and ICE Futures Europe in London, the former International Petroleum Exchange, have now tripled "margin calls" for some contracts. They hope the increased margin calls will reduce volatility and force out some of the more speculative players...
The move, introduced by ICE earlier in the week and followed by Nymex yesterday, has coincided with a fall in the price of oil by around $7 a barrel from last week's record high of more than $135. In London yesterday, a barrel of Brent crude for July delivery was up 88 cents at $127.77 in late trading. In New York, a barrel of sweet crude was up $1.34 at $127.96.
Rob Laughlin, senior energy broker for MF Global in London, said that, as a result of the increases, many "smaller speculators have finally taken their money and run". However, Walter Lukken, acting chairman of the US Commodities Futures Trading Commission, yesterday dismissed the idea that raising margin calls would help long- term, saying it would just force speculators to go elsewhere.
The bell rang on the top for oil when Morgan Stanley touted the $150 barrel for Brent crude. You had that news here under "Flip Flops."
The rally in the refiners Friday, despite the downgrades by Lehman and Citigroup's attribution that the refiners would be lower by the end of the year, marked the low in the refiner stocks also.
Tesoro (TSO 24.85) was the stock up the most on Friday in the entire S&P 500. Ironic that it moved after Lehman downgraded it?
I gave you the news before it happened, and while it happened. The Street has a different agenda.
Look for continual pressure on oil prices next week. Remember last week? Whatever happened to the oil problems in Nigeria? Or the 8.8 million barrel drawdown in gasoline?
CNBC was breathlessly reporting this as "news." It wasn't news. It was just hype.
Oil is going down, and stocks Monday should go up.
It's mutual fund Monday at the beginning of a new month!