Hi Aggie, I was asking a while back if anyone in the oil business remembered
the 'false oil glut' of '93 described by Matt Simmons.
In considering how much weight to give Matt Simmons' ideas, it would be valuable to compare his description of this with the memories of other knowledgeable oil biz folks.
Here's Matt Simmons' description from issue 39b of 'Offshore Drill Bits' atoffshore.com
-------------------------------------------------------
>>>>>> The MG (Metallgesellschaft) Debacle <<<<<<
In mid-1993, as oil prices were bouncing between $18 and $20 a
barrel, suddenly prices started to fall. As the fall accelerated,
the industry "experts" all started talking about the "oil glut",
and the world awash with oil. As prices finally broke through
$15, briefly touching around $13.50, one noted analyst was quoted
as saying the "fear premium" had finally disappeared and we would
have oil prices in this range for many years to come. This 1993
oil price fall turned out to be the first of two "paper barrel"
collapses.
All that was happening was the MG (Metallgesellschaft) trading
firm got really long on oil, ran out of funds and found
themselves in a savage short squeeze. As contracts were
liquidated, prices fell even faster. Once their positions got
totally unwound, by an expert who had conducted the same exercise
for silver back when the Hunts tried to corner silver, crude oil
quietly began its rise back to $18 to $20 level. As far as we
know, our firm was first in the world to figure out that "MG was
the culprit." By late fall of 1994, it was widely acknowledged
that MG caused the "phony collapse." Now, we have gone through
the second "phony collapse" of paper barrels, but this time, the
culprit was bad data (IEA) and hedge funds who bet accordingly.
Not a pretty picture for the astuteness of our energy analysts or
the industry executives.
-----------------------------------------
Aggie, et al, Is Matt Simmons' description of this '93 event accurate?
Is he distorting the story to use it to support his ideas about the present situation, or is he telling it straight?
regards,
diana |
