As I recently pointed out on my blog (“The Dollar and Oil”), oil and oil stocks in particular are underperforming the market rally. We have seen inventory builds in the U.S., including a big build this week, but there are many other forces that should be bullish for oil prices, even in the short-term. Here are just some recent examples … - Iran Oil Minister Masoud Mir-Kazemi says OPEC won’t raise production when it meets in Luanda, Angola, on December 22 to review output targets and the impact of supply reductions announced last year. Ministers from Kuwait and Nigeria have also indicated they expect quotas to be left unchanged.
- The purchasing managers’ index for China, released today by HSBC Holdings, rose to a seasonally adjusted 55.7 from 55.4, the fastest pace in five years. Combined with other indicators, this points to Chinese oil demand increasing by 5% this year and at least 4% next year. A U.S.-bound supertanker was seized by pirates off Somalia. This potentially impacts U.S. supply.
This is just the news out recently. So why isn’t oil higher? I think someone with big pockets is selling every time the price of oil goes up. It could be a big trading house like Goldman Sachs — the “vampire squid” of the American economy, as Matt Taibbi called it in his now landmark Rolling Stone article.
I’d rather not be on the other side of their trades, for the simple reason that they have tools and access the rest of us don’t — like High Frequency Trading (which I believe should be illegal) that allows them to push markets around in rather shifty ways. But it’s not just Goldman Sachs — there are multiple vampire squids who can manipulate the markets; they have very deep pockets.
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