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: Tomas who wrote (74926)	9/27/2000 11:28:24 PM
From: Tomas	Respond to of 95453

Oil traders pit their wits against fundamentals: Dealers are not behind recent price jumps Financial Times, September 28 By Dan Bilefsky, Robert Corzine, Nancy Dunne And Andy Webb-Vidal The noisy oil trading pits in New York and London, packed with dealers in brightly coloured jackets executing trades with sign-language and raised voices, have been at the centre of the storm that has swept through crude oil markets in recent weeks. A few hundred traders at the New York Mercantile Exchange and the International Petroleum Exchange in London have played a central role in the rise in oil prices to 10-year highs amid fears about a winter fuel shortage in the northern hemisphere. Prices are affected by the mood of traders as they consume the data and news headlines fed to them on the huge electronic screens hanging above the pit. One New York trader says even the weather conditions encountered by dealers on the way to work can affect sentiment in a market driven as much by psychology as fundamental and technical issues. A cold wind whipping round the World Financial Centre, where Nymex is situated, can inflame fears that a harsh fall could further strain US heating oil stocks already at a 26-year low. But, while traders undoubtedly exert an influence on the price, they are not the real force behind the market's ascent to levels not seen since the Gulf War. In London, a handful of speculative day traders - identified by their red jackets and traditionally drawn from the local community - play the market to make money for themselves. But most dealers are employed by commodities trading companies, which broker transactions between oil producers and consumers. "We're just the means to an end for other people to manage their risk. There hasn't been a strong speculative element to the price rise," says Robert Laughlin, director of energy at GNI and based on the trading floor at the IPE. He says the price has been driven up to last week's Dollars 37.10 a barrel New York high by supply and demand. "The key has been the shortage of physical product." Aaron Kildow, at Prudential Securities in New York, agrees but says last week's rally was a case of the market running away with itself. "It started out as a fundamentally driven market and when we got above Dollars 32 you saw funds come in. Then it got technical and was driven up by bullishness." Brakes were applied to the market last Friday when President Bill Clinton announced the release of 30m barrels of oil from US emergency reserves. "It broke the bullish fever of the market. It made traders go back and look at the hard numbers. Does crude really need to be valued at Dollars 34?," asks Mr Kildow. Mr Laughlin says the perceived shortage of crude had been a misunderstanding. "We actually don't need more crude, we require more product and we need it instantly. Heating oil stocks are at a 26-year low. US refineries have been working at full capacity for 12-14 months," he says. "Oil refiners underinvested when the market was poor. They had no margins to spend upgrading their plants. Now they don't have the capacity to cope." ...