Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: kormac who wrote (59396)	1/31/2000 10:56:00 AM
From: Tomas	Respond to of 95453

Dealing with oil data in a high-tech age - Houston Business Journal, Jan.31 Oil industry experts tackled the prickly issue of just how oil prices are set this week at a University of Houston business school function. And a good number had less than positive things to say. Houston oil industry investment banker Matt Simmons has for some time complained that commodities traders have sent oil and gas prices fluctuating wildly based on faulty information and improper analysis. And on Wednesday he reiterated his concern that, instead of creating market transparency, the current system of information collection and reporting, combined with activities of commodities, traders have "created a house of mirrors" that has caused several price busts, including the oil "gluts" of `93 and `97. Simmons' point is a good one: the oil pricing system is a bad mixture of the old and new. Commodities traders dealing in futures contracts must rely on oil and gas information intended for a bygone era. Much of it is incomplete, some of it is false and almost all of it is outdated. Monthly supply reports by petroleum industry and government agencies now move the financial markets as profoundly as Alan Greenspan does the Dow Jones Industrial average. No one this week was arguing a return to oil prices arbitrarily set by governments and cartels. But now that market forces are at work, industry experts point to a number of factors that hamper the system: - Oil and gas supply can be measured by the producers to only plus or minus 5 percent. However, it's reported down to a tenth of a percent. - Gatherers of data in various organizations offer their own opinions on the data, which can have an enormous impact on prices. - Hard data becomes available 12 months to 24 months after the fact, and revisions to the data are rarely reported and usually don't repair any damage of misinformation. - Cost-cutting and downsizing by the data-gathering agencies has affected quality of data. Some on Wednesday defended the current system. Edward Morse of Hess Energy Trading Co., a proprietary currency trading firm, attributed the wild market volatility not to faulty data but market fundamentals. And officials with the monthly Oil Market Report were skeptical that its information and analysis moved markets. Still, there's no dispute that no one knows how many barrels of oil and how much cubic feet of natural gas exist in the market at any given time. And most admit estimates can be wildly off. So the issues raised by Simmons and other analysts bear consideration. Market volatility that swings oil prices from just over $10 per barrel to nearly $30, where it has recently been can't be good for an industry and an economy like Houston's that is inexorably tied to it. If oil prices are to be set by market forces -- and they should be -- then the oil industry must do what it takes to ensure those who set the prices have full access to the information they need. amcity.com