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Dian L. Chu

Dian L. Chu

Dian L. Chu, is a market analyst at EconMatters.EconMatters  is made up of a team of financial and market analysts who research, analyze, and write…

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Why are Banks Allowed to Manipulate the Oil Markets?

Why are Banks Allowed to Manipulate the Oil Markets?

When is this country going to say enough is enough and start putting people in jail for this kind of blatant market manipulation? It is obvious that the Oil market is manipulated, oil has gone nowhere for five months because there is no reason for it to go anywhere, i.e., there are a ton of supplies on the market, no Middle East disruptions, Israel hasn`t attacked Iran, huge builds in gasoline products, no jump in demand.

US Crude Stocks 3

And yet Oil mysteriously rises $10 in this common period for manipulating markets at the tail end of the year, and the beginning of the new year, let`s juice it up before the contract rollover, no one cares, no one is really looking too closely at what we are doing, everybody is focusing on fiscal cliff issues and the debt ceiling debate.

Another Bearish EIA Report

So we have another bearish inventory report on Wednesday, and oil refuses to go down, why so they can force it one leg higher, and get other trapped traders to buy their contracts from them so they don`t have to rollover at a huge cost.

US Gasoline Demand 3

Force Stops & Reduce Rollover Exit Costs

This is why when nobody takes physical delivery prices do not go down an equal amount on rollover, as less than .005% take physical delivery, this way prices aren`t negatively affected after a large amount of money comes into a futures contract in an equally large rollover effect on exiting.

Related Article: As Canadian Crude Plummets, Find the Natural Gas Opportunity

It is because the side which has pumped the futures contract with a bunch of cash, makes the other side who rationally would be short based upon the normal price history and abundance of supplies, has to cover thus buying the contracts from the pumpers in this case, thus avoiding a large rollover effect when they have to exit because the contract ends after a month.

There is a whole art to the manipulating game in the oil market, and the big banks play it quite well. And given how inept congress is, who has investigated them twice in the last five years every time prices run up and has done nothing, the big banks think they are invulnerable on this issue.

If you haven`t clamped down on us yet, and you cannot even get your own house in order, then there is no way you can figure out how we are manipulating the oil markets.

Trading Records Last 4 Weeks

But enough is enough, this is blatant criminal behavior, and it is pretty easy to know who the culprits are just pull the last 4 weeks trading records and see who bought large positions. The fundamentals never materially changed in fact they got more bearish as the products` supplies grew at a substantial rate, and there were no Middle East supply disruptions, or strategic hot spots that were in danger of having supply disruptions, nada.

“Asset Class” Euphemism for Roulette Table

Prices are not determined by the fundamentals in a manipulated market they are determined by oil being an “Asset Class” which is code word or a euphemism for giant Casino in New York instead of Vegas.

So we cannot legally play poker online in this country, but you can pull up your internet connection, and place your wager on the price of oil, such hipocracy in this country.  The price of oil, and as such gas is determined not by supply and demand factors, but by whether Goldman Sachs (NYSE: GS) or Morgan Stanley (NYSE: MS) or J.P. Morgan (NYSE: JPM) puts $400 million on Black or Red, the literal Oil Roulette game of the big banks.

If Goldman Sachs puts $400 million on Black prices go up, if they put $400 million on Red prices go down, as simple as that, this is actually how the price of oil is determined, nothing more and nothing less.

Market Correlation & Wagering Strategy

Furthermore, Goldman Sachs or Morgan Stanley doesn`t factor in how this aligns with the fundamentals of the market, they don`t care, they more care about how putting $400 million on Red will affect their other manipulated market the equities market, as the equities market has a lot of oil and gas components in it.

Thus they do think somewhat strategically, i.e., they try to align their betting strategies, so when we put $400 million on Red, let`s pick a time when we are going to sell off the S&P 500 as well. This is why markets are so correlated even when one is a commodity that consumers put in their car, and has supply and demand issues, where the other is purely an investment vehicle.

Related Article: The Market Tells Me All I Need to Know

Betting Reports & Market Collusion

So Mr. Consumer the next time gas prices go up, and they will for the next month as retail prices catch up to the manipulated move in the futures market, just realize that Morgan Stanley decided to put it on Black this past month, and when your prices go down, praise the alter of J.P. Morgan as they decided to go Red that particular month.

And it is always coordinated; you never have the big banks putting on Black and Red, thus trading/wagering against each other. They will all come out with their Betting Reports, I mean Research Reports designating the myriad of market conditions as to why they decided to put the cash on Black versus Red this month.

CFTC: These small fines are a joke!

The real reason for market selloffs in Oil is usually due to the occurrence that the big banks are going to sell off equities in the summer, late April anyway, so they start selling off oil as well, i.e., $400 million on Red! Such a scam, such a rigged market, this is getting so old…..where are the regulators?

I don`t want congress to have more hearings on the subject, I want the governmental organizations who are tasked with monitoring this bullshit to start investigating, and shutting trading shops down for this crap!

EIA Reports: Why bother?

Why even continue this farce of having EIA reports anymore, they are completely irrelevant to the price of oil, and oil continuously goes the opposite way of the reports, why even bother with this government agency, it is not like the history of the market the last five years tracks the fundamentals of supply and demand.

US Crude Oil Domestic Production 2

Government Agencies & Regulators at their finest

Let`s just save some more tax money and shut down the agency, at least consumers will only be getting screwed by wall street traders. And while we are at it lets just abolish the SEC and the CFTC, as they are completely useless. Furthermore, since all markets are ripe with manipulation, essentially the wild-west; why not reduce government costs by cutting funds to these two agencies entirely.

They serve no real purpose when markets are corrupted everyday with Fake Orders, Dark Trading Pools, High Frequency Trading Algos, and the like except to further government costs & bureaucracy while strictly providing the illusion of fair markets. These organizations are a complete joke, and have been for decades!

The Cheating isn`t even hidden anymore


Literally the CFTC only has to pull up a trading Dom watch it for five minutes and watch all the flashing fake large orders that appear and disappear as price reacts to their presence to know that these markets are infested with manipulation termites. They obviously purposely look the other way, or avoid looking at all!

Related Article: The Appeal of Master Limited Partnerships to Investors

OPEC points to a Manipulated Market

Americans have it all wrong, you are not being held hostage by the middle east, or the cartels like OPEC, it is the Big Banks Cartel, let`s call them the Roulette Cartel that is holding the American and World consumer hostage, and this crap needs to stop.

Even OPEC realizes this manipulation, and they have publicly stated many times it is the speculators that are determining the price of oil. But they use too kind of a word, because these are just a bunch of Vegas style Roulette players with deep pockets who unlike Roulette have no risk because while there is randomness with a slight edge to the casino in Las Vegas, the Oil Roulette table of the Wall street banks never have a losing quarter, shoot they very rarely have a losing day, and it is hard to ever lose when you’re the ones moving the market.

Wall Street Mansions don`t build themselves

Consumers realize when they gamble in Las Vegas that those casinos are not built by them winning, but they probably don`t realize to the extent that those Hampton and Connecticut mansions are being built through the sacrifices of consumers at the pump.

Yes, there have been 30 million barrels added to gasoline supplies over the past 6 weeks, but you are charged 30 cents higher in the futures market, and these prices will be coming to a neighborhood near you.

US Gasoline Stocks 2

Are You Kidding Me?

So let me get this straight, the gasoline market went from a tight, to a well-supplied market in six weeks, and consumers are going to be punished 30 cents more for this ridiculous build in more supplies? All these gasoline supplies are building in storage because there is not enough consumer demand for the product, and prices are going substantially higher not lower?

This is the exact opposite of how efficient markets are supposed to work in a non-rigged market, this very fact, should be a wake-up call for regulators. Hello CFTC, what is going on in the gasoline RBOB market? Do you think you should start investigating, you do exist for a reason, there is a blatant, clear cut case of price manipulation in the RBOB gasoline market, now get to work and do your job!

By. Dian Chu

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Leave a comment
  • David B. Benson on January 12 2013 said:
    Well maybe but recently here gasolene prices went down to gas war levels, US$3.199.
  • Randy Charest on January 13 2013 said:
    you know...this country is so corrupt its all done.we will be living like a 3rd world country very soon and no one will have a job or anythything else..doesn't matter what you have.we are all done.stick a fork in us
  • Eric Murris on January 13 2013 said:
    The oil price is expressed in US$. In a world were large amounts of electronic dollars are being created at an ever increasing speed one would expect an underlying trend in rising prices of real asset classes such as oil regardless of the short-term fluctuations due to possible manipulation!?
  • Gary Dollar on January 13 2013 said:
    If anyone expects ANY action against any of these crooks by ANY Government agency, FORGET IT!!! Our "Commander in Chief" has TWICE, when gas reached $4 gal, and the "people" were P*ssed, arranged convenient "photo-ops" and wheeled out Eric "I got guns for you, Amigo" Holder, who was charged to search out price manipulation and what did he find??? The FIRST time, he was questioned, and reported "Troubling Things", then went back to the Mexican munitions deal...the SECOND time, EVERYBODY just FORGOT! It is to the point where even the ridiculous excuses have pretty much ended (no more "Arab Spring", hurricanes, leaking oil pipelines, SANDSTORMS (True!), just good ol' fashioned SCREWING!
  • Jean Pontbriand on January 13 2013 said:
    Awesome article. Your understanding of the intricate workings of the manipulation of energy prices is well beyond my understanding but I get the general idea and this confirms my suspicions all along that consumers are being taken for a ride while our governments are asleep or just don't want do be bothered, after all, the only thing that matters to them when in powwer is to remain in power.

    I e-mailed my Prime Minister here in Canada about a year ago and asked him to look into the collusion taking place among oil companies (regarding the easily observable price fixing at all gas stations across the country)and the level of stupidity and nonchalance of the reply I got from his office is very consistent with the reponse from US politicians that I'm sure people such as yourself are getting when reporting your findings to them.

    It is most unfortunate that the aristocracy forgets lessons from the past and becomes progressively so arrogant and corrupt while governments supposedly representing the people become so complacent and eventually, all hell breaks loose and then they all wonder why there is a revolution or a coup d'état or an Arab Spring.

    Keep up the great reporting.
  • Benjamin Cole on January 19 2013 said:
    Very enjoyable read.

    In 2008, when oil went to $147, and there were tankers of crude resting at Malta nowhere to offload....

    I asked if Russia, OPEC or others were sponsoring The OIl Drum, or planting other hysterical stories....PR is very sophisticated, and most sophisticated when you do not know it is going on..

    I also asked, "If you were Putin, and your nation's and personal future depended on higher oil prices, would you not at least try to game oil markets?"

    With billions of dollars at his command, we can only assume Putin is trying t game oil markets. It is in his self-interest and the interest of his nation to do so. It is his patriotic duty.

    And who is going to throw Putin in jail? Or OPEC nations, trading through cloaked identities, as is legal.

    Did you know it is illegal to plant a story about a stock (equity), but legal to plant stories about commodities?

    Great post.

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