|
|
Oil and Commodities Bubble `Adjusts,` i.e., Bursts
3 December 2014
EIRNS — Author Krim Delko in the Swiss financial daily Neue Zürcher Zeitung today cites sources in the hedge fund sector, who point to the fact that the current collapse of prices in oil, copper, iron ore, and gold indicates an "adjustment" of prices unleashed by sales of commodity-based derivatives. Firms such as Vitol, Gunvor or Glencore dominate trading with oil, but Wall Street banks also are strong in the market. "According to fund managers, the answer" to the question of who is unleashing the collapse, "can be found in the balance sheets of the commodity traders. It is presumed that here, much as, for instance, in the real estate market, people play with a lot of borrowed money. In addition, creative financial instruments are involved." Nobody knows how large the leverage is, because traders are very imprecise. However, "in talks with fund managers it becomes clear that the recent turbulence is not determined by events on the real market [e.g., OPEC decisions or similar things], but by traders. This can be seen in the price reaction of the commodity segment. Additionally, commodities have for years been traded much over the balanced price. Extraction of copper costs ca. $1.50 per pound on average, but copper costs, even after the turbulence, still twice as much. The case is similar for oil. This is not sustainable in the long term and suggests that traders are at work. ... Recent turbulence is just the beginning of the adjustment phase." Claudio Celani |
