Oil Drops-No Money To Cover Losses
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Oil Drops-No Money To Cover Losses
6 days of falling oil prices, and a company has already filed for chapter 11 protection because they don't have the cash to cover large bets made on the futures market. i wonder how many of the millions/billions they made while oil was skyrocketing, they managed to place in shelters that are safe from debt repayment. this is an example of what can happen when oil futures traders are allowed to take large positions in the market, while only having to put up less than 5% of the cash:
Analysts said liquidity problems at oil and asphalt transportation and storage provider SemGroup LP may have helped trigger the recent sell-off. A number of the company's subsidiaries filed for reorganization under Chapter 11 bankruptcy rules in Delaware federal court Tuesday.
In the bankruptcy filing, the Tulsa, Okla.-based company described what it called a "severe liquidity crisis" caused by demands for massive amounts of more money from brokers to cover large bets it made on the futures market. Those demands grew increasingly tough to meet as energy prices soared and Wall Street's credit problems mounted.
On July 16, a day after oil prices began to tumble, the company transferred its trading account and recognized $2.4 billion in losses as it became clear it could not cover its trading positions. Co-founder and former President and CEO Thomas Kivisto owes about $290 million of that total.
"It turns out that the run-up in crude oil prices in June and early July had ... a lot to do with the squeeze on SemGroup's hedges," analyst and trader Stephen Schork said. "Now the only question is are there more 'SemGroups' lurking in the shadows?"
Analysts said liquidity problems at oil and asphalt transportation and storage provider SemGroup LP may have helped trigger the recent sell-off. A number of the company's subsidiaries filed for reorganization under Chapter 11 bankruptcy rules in Delaware federal court Tuesday.
In the bankruptcy filing, the Tulsa, Okla.-based company described what it called a "severe liquidity crisis" caused by demands for massive amounts of more money from brokers to cover large bets it made on the futures market. Those demands grew increasingly tough to meet as energy prices soared and Wall Street's credit problems mounted.
On July 16, a day after oil prices began to tumble, the company transferred its trading account and recognized $2.4 billion in losses as it became clear it could not cover its trading positions. Co-founder and former President and CEO Thomas Kivisto owes about $290 million of that total.
"It turns out that the run-up in crude oil prices in June and early July had ... a lot to do with the squeeze on SemGroup's hedges," analyst and trader Stephen Schork said. "Now the only question is are there more 'SemGroups' lurking in the shadows?"
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From: Tomball, Texas
Some good reading. http://www.bloomberg.com/apps/news?p...c&refer=energy
Especially noted this comment... ``Sophisticated paper speculators who never intend to use the oil are driving up costs for consumers and making huge profits with little to no risk,'' the groups wrote. On June 6, when oil gained $10.75 a barrel, 22 barrels of oil were bought on paper for every barrel consumed, they said.
MikeyB
Especially noted this comment... ``Sophisticated paper speculators who never intend to use the oil are driving up costs for consumers and making huge profits with little to no risk,'' the groups wrote. On June 6, when oil gained $10.75 a barrel, 22 barrels of oil were bought on paper for every barrel consumed, they said.
MikeyB
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Some good reading. http://www.bloomberg.com/apps/news?p...c&refer=energy
Especially noted this comment... ``Sophisticated paper speculators who never intend to use the oil are driving up costs for consumers and making huge profits with little to no risk,'' the groups wrote. On June 6, when oil gained $10.75 a barrel, 22 barrels of oil were bought on paper for every barrel consumed, they said.
MikeyB
Especially noted this comment... ``Sophisticated paper speculators who never intend to use the oil are driving up costs for consumers and making huge profits with little to no risk,'' the groups wrote. On June 6, when oil gained $10.75 a barrel, 22 barrels of oil were bought on paper for every barrel consumed, they said.
MikeyB
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From: Forest Grove, Oregon
The only sad part of this is if they regulate it then only the big boys with lots of $$$ will control the oil. So it will go from several hundred people with there fingers in it to only a few dozen people who will control 50% or more of the oil speculation market and who knows what group is the less of 2 evils.
I think I can... I think...
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From: Texas (DFW area)
The only sad part of this is if they regulate it then only the big boys with lots of $$$ will control the oil. So it will go from several hundred people with there fingers in it to only a few dozen people who will control 50% or more of the oil speculation market and who knows what group is the less of 2 evils.
I'm ok with the big boys being the only ones doing it. Heck they are the only ones anyway.
They got big by knowing what their doing. They'll be less apt to manipulate the market if they know that they could lose their shirt if something goes wrong.
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From: Harwood ND
6 days of falling oil prices, and a company has already filed for chapter 11 protection because they don't have the cash to cover large bets made on the futures market. i wonder how many of the millions/billions they made while oil was skyrocketing, they managed to place in shelters that are safe from debt repayment. this is an example of what can happen when oil futures traders are allowed to take large positions in the market, while only having to put up less than 5% of the cash:
Analysts said liquidity problems at oil and asphalt transportation and storage provider SemGroup LP may have helped trigger the recent sell-off. A number of the company's subsidiaries filed for reorganization under Chapter 11 bankruptcy rules in Delaware federal court Tuesday.
In the bankruptcy filing, the Tulsa, Okla.-based company described what it called a "severe liquidity crisis" caused by demands for massive amounts of more money from brokers to cover large bets it made on the futures market. Those demands grew increasingly tough to meet as energy prices soared and Wall Street's credit problems mounted.
On July 16, a day after oil prices began to tumble, the company transferred its trading account and recognized $2.4 billion in losses as it became clear it could not cover its trading positions. Co-founder and former President and CEO Thomas Kivisto owes about $290 million of that total.
"It turns out that the run-up in crude oil prices in June and early July had ... a lot to do with the squeeze on SemGroup's hedges," analyst and trader Stephen Schork said. "Now the only question is are there more 'SemGroups' lurking in the shadows?"
Analysts said liquidity problems at oil and asphalt transportation and storage provider SemGroup LP may have helped trigger the recent sell-off. A number of the company's subsidiaries filed for reorganization under Chapter 11 bankruptcy rules in Delaware federal court Tuesday.
In the bankruptcy filing, the Tulsa, Okla.-based company described what it called a "severe liquidity crisis" caused by demands for massive amounts of more money from brokers to cover large bets it made on the futures market. Those demands grew increasingly tough to meet as energy prices soared and Wall Street's credit problems mounted.
On July 16, a day after oil prices began to tumble, the company transferred its trading account and recognized $2.4 billion in losses as it became clear it could not cover its trading positions. Co-founder and former President and CEO Thomas Kivisto owes about $290 million of that total.
"It turns out that the run-up in crude oil prices in June and early July had ... a lot to do with the squeeze on SemGroup's hedges," analyst and trader Stephen Schork said. "Now the only question is are there more 'SemGroups' lurking in the shadows?"
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From: Tomball, Texas
The only sad part of this is if they regulate it then only the big boys with lots of $$$ will control the oil. So it will go from several hundred people with there fingers in it to only a few dozen people who will control 50% or more of the oil speculation market and who knows what group is the less of 2 evils.
MikeyB
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From: Tomball, Texas
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From: Tomball, Texas
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From: My head lays down in Murrieta, but the day light hours are spent in San Diego, Ca.
Yep, the domino effect HAS started My company is getting hit HARD with Sem's Chapter 11 filing. We banked a major part of our business with them here in the western states. We do ALL of their asphalt/asphalt emulsion hauling out of and in to their california plants; and we have several joint venture bids/contracts with several city, county and state municipalities. All which have been put on hold or even cancelled all together. It doesn't look good for us at all. This on top of an already very slow, poor year. It's like we never even pulled out of the winter season; which is usually slow january and february, then gang-busters the rest of the year. NOT this year though!!!!!
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From: Harwood ND
I have seen similar things happen to grain elevators. They Start hedging the market and then wind up holding the bag when prices finally tank. It will happen there also when other comodity prices start coming back down.
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The only regulation needed is to make them put up the money for the contracts.
I'm ok with the big boys being the only ones doing it. Heck they are the only ones anyway.
They got big by knowing what their doing. They'll be less apt to manipulate the market if they know that they could lose their shirt if something goes wrong.
I'm ok with the big boys being the only ones doing it. Heck they are the only ones anyway.
They got big by knowing what their doing. They'll be less apt to manipulate the market if they know that they could lose their shirt if something goes wrong.
good point. with less than 5% cash required there is minimal risk, and actually encourages them to take advantage of the system.
how is forcing oil futures traders to abide by the same rules that are in place for all other commodities trading, not fair to the small investor? if you have the money and the nerve to enter the market, everyone is welcome to try their luck- if you don't have the cash, you have no business in the market anyway.
just make them abide by the same rules as traders of other commodities.
lends some credibility to those who claimed that some of these record prices are due to manipulation.