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Tuesday, February 27, 2024

Tuesday Top Off, The Oil Scam Continues

Mr. Sparkle has been keeping an excellent chart tracking the "open interest" over at the NYMEX.

This is a great illustration of what total BS the "demand" for crude is as month after month, traders feign an interest in 360M to 400M, drive prices to a frenzy, and then quietly dump all but 40M of those barrels – canceling contracts so that America will once again be shorted

This week marks that time of the month when the front-month contract, having been pumped up to irrational levels, gets too close to expiration, when the oil buyers may actually have to buy the oil!  So what do they do, they use the ridiculous NYMEX rules that make it virtually free to "roll" their barrels to the next month, enabling them to pretend that they now want 360M December barrels of oil, EVEN WHILE THEY ARE DUMPING 320M barrels of November crude like it was toxic waste!

 

Crude pricing is based on the "front-month" contract.  The November contract has been pushed to over $80 as traders order barrel after barrel.  On this chart you can see that there were 240,000, 1,000 barrel contracts of purported interest in November contracts back around the 10th, when crude was at $74.  At that time, while traders cancelled the oil for delivery to the United States, while they cancelled October contracts that they held in their hands that would have relived prices at the pump for 300M Americans – while this scam was being pulled off in order to create an artificial shortage of barrels – they were busy pretending to want 120M additional barrels of crude for November delivery.

This skyrocketed the price of November crude from $78 to $82, just in time for it to become the front-month contract when October contracts terminated on the 20th (not the very rapid dumping of October barrels).  Notice at no time were any barrels actually DELIVERED to anyone – this is how they control the virtual price of the real oil you pay for, manipulating supply and demand in order to wring every last cent from your wallet. 

How is this allowed to continue?  Well the average oil company worker makes $3,000 worth of campaign contributions and the average US citizen (that would be We, the People) makes $100 worth of contributions – well, you do the math…

The November contract closes on Oct 22nd so traders have 9 working days left to dump 200M of your barrels in their monthly version of the Boston Tea Party only, rather than chanting "No taxation without representation" the oil traders like to shout "Let's rape the American public while their representatives are asleep at the wheel."  Catchy, isn't it?

As a very honest trader pointed out to me, if the same scam works month after month after month then of course he gets in on it and rides along.  His particular trading is not going to affect the outcome as it's the "Big Boys" who clearly manipulate the market and they don't mind that other traders ride on their coattails – it makes the game look less rigged if they can point to the "average trader" and tell their congressman, "it's just the way oil trades."

How do we put an end to this nonsense – well we've tried telling our Congresspeople and they hold some hearings but its very easy for the oil companies to get Congress to do nothing with their endless parade of "experts" who tell them regulations would only make things worse (and, as long as they control the prices, they will certainly make sure that's true!).  Another thing  we can do is actually very simple.  We can screw up their whole scam by buying oil!  That's right, if we simply order oil AND have it delivered, their whole shell game falls apart.  Last month, after I first suggested this strategy, we closed October with 48M barrels on order, more than double the September delivery total that led to "record inventory shortages" right in the middle of hurricane season and drove prices to $80 for the first time.

While we may lost $5 per barrel on the barrels we have delivered, we get to short companies like XOM, CVX, COP and SU, who's runaway costs are simply choking their profits, making it impossible for them to match expected performance.  XOM's market cap makes them the 17th largest Nation (by GDP) on earth, right behind the Netherlands and well ahead of Belgium, who's GDP is just 393Bn, well behind XOM's implied value of $513Bn.  That means each of XOM's 106,000 employees is worth about 125 times the average Belgian (all 10M of them!).  Well, they certainly give a lot more to Congress anyway!

Thanks to last month's effort, we now we have 48M barrels rushing to Cushing over the next 3 weeks and tomorrow we will get our first chance to see if 48M barrels is enough to tip the inventories in our favor.  Meanwhile, you can see the very rapid pattern of preemptive dumping that is going on as NYMEX traders simply can't afford to have that many barrels delivered in two consecutive months.  This will be fun to watch!

On the market front, we had a fantastic day and took a some profits off the table on that amazing rally as the dragging SOX and Russell bothered us just a bit but we've got lots of things we'd be happy to get back into with our cash if we can get over the hump tomorrow:

Description

  Basis

Open

 Sale Price

Sold

 Gain/Loss

%

10 JAN 52.50 AMGN CALL (AMQAZ) 3,010.00 9/10 6,490.00 10/9 3,480.00 116%
10 JAN 52.50 AMGN CALL (AMQAZ) 4,010.00 9/10 6,490.00 10/9 2,480.00 62%
20 JAN 75.00 COF CALL (COFAO) 7,210.00 11/28 7,190.00 10/8 -20 0%
10 NOV 32.50 CSCO CALL (CYQKT) 1,210.00 10/4 1,490.00 10/8 280 23%
10 NOV 32.50 CSCO CALL (CYQKT) 1,210.00 10/4 1,490.00 10/8 280 23%
20 NOV 07 40.00 EBAY CALL (XBAKH) 2,510.00 10/1 2,590.00 10/9 80 3%
10 JAN 65.00 EDU CALL (EDUAM) 2,410.00 7/13 8,090.00 10/9 5,680.00 236%
10 JAN 570.00 GOOG CALL (GOPAQ) 29,580.00 9/12 72,490.00 10/9 42,910.00 145%
20 OCT 115.00 IBM CALL (IBMJC) 7,410.00 10/4 6,990.00 10/8 -420 -6%
5 OCT 47.50 JPM CALL (JPMJW) 251 9/27 465 10/8 214 85%
80 OCT 45.00 NEM CALL (NEMJI) 6,010.00 10/8 11,990.00 10/9 5,980.00 100%
500 OCT 52.00 QQQQ PUT (QQQVZ) 22,040.00 10/5 17,460.00 10/8 -4,580.00 -21%
5 OCT 105.00 RIMM PUT (RULVL) 235 10/4 5,840.00 10/8 5,605.00 2385%
5 NOV 115.00 RIMM CALL (RULKU) 2,060.00 10/4 4,440.00 10/8 2,380.00 116%
5 OCT 110.00 RIMM PUT (RULVB) 2,700.00 10/4 990 10/8 -1,710.00 -63%
3 JAN 7.50 SCI CALL (SCIAU) 655 11/15 1,670.00 10/8 1,015.00 155%
15 NOV 150.00 SHLD CALL (KTQKU) 7,510.00 10/4 10,940.00 10/9 3,430.00 46%
20 OCT 50.00 SNE CALL (SNEJJ) 2,310.00 10/4 2,490.00 10/8 180 8%
10 DEC 20.00 SYX CALL (SYXLD) 2,360.00 9/24 4,490.00 10/8 2,130.00 90%
10 OCT 50.00 TSO PUT (TSOVJ) 1,110.00 9/30 2,040.00 10/9 930 84%
10 OCT 50.00 TSO PUT (TSOVJ) 1,110.00 9/25 2,040.00 10/9 930 84%
20 OCT 35.00 TXN CALL (TXNJG) 2,810.00 9/24 4,330.00 10/9 1,520.00 54%
30 OCT 90.00 XOM PUT (XOMVR) 2,560.00 9/28 3,890.00 10/8 1,330.00 52%

We followed through with our plan of picking up oil puts on yesterday's run up (thanks to all the oil bulls for that idiotic run-up).  It should be an interesting day!

 

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