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Oil Speculators. WP:
So much for supply and demand. More on Vitol:Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses.
But when the Commodity Futures Trading Commission examined Vitol's books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising to the commodities markets was the massive size of Vitol's portfolio -- at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange.
The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators.
The CFTC, which learned about the nature of Vitol's activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency. That figure may rise in coming weeks as the CFTC checks the status of other big traders. [...]
CFTC documents show Vitol was one of the most active traders of oil on NYMEX as prices reached record levels. By June 6, for instance, Vitol had acquired a huge holding in oil contracts, betting prices would rise. The contracts were equal to 57.7 million barrels of oil -- about three times the amount the United States consumes daily. That day, the price of oil spiked $11 to settle at $138.54. Oil prices eventually peaked at $147.27 a barrel on July 11 before falling back to settle at $114.98 yesterday.
The documents do not say how much Vitol put down to acquire this position, but under NYMEX rules, the down payment could have been as little as $1 billion, with the company borrowing the rest..
Also see James Galbraith's "How to Burn the Speculators."A British oil company which once employed senior Tory Alan Duncan as a consultant paid $1 million to the Serbian war criminal Arkan to settle a score over a secret oil deal to supply Slobodan Milosevic's Serbia with fuel.
An investigation by The Observer has established that millionaire oil trader Bob Finch, director of Vitol, based in Knightsbridge, London, used Arkan as a 'fixer' after a controversial oil deal in the former Yugoslavia collapsed.
Documents obtained by The Observer reveal that in 1995 Vitol signed a deal with a Serbian company, Orion, to sell thousands of tonnes of oil to the former Yugoslavia.
The deal was struck with Belgrade-based businessman Zveto Dragovic in June 1995 while the Bosnian conflict was still raging and UN sanctions were in place. Vitol insists the oil was delivered only after sanctions were suspended and the deal was therefore entirely legal.
Only weeks after the deal was struck Serb forces walked into the United Nations 'safe area' of Srebrenica and led 6,000 Bosnian Muslims to their deaths. [...]
Vitol's involvement with Arkan came to light as a result of a £122 million court case involving a controversial oil deal in Iran. British businessman Kaveh Moussavi accuses Vitol of cutting him out of a deal to transport millions of gallons of oil from the Caspian Sea in the north of the country to the Gulf in the south.