(* Please see comment at end of post.)
The Wall Street Journal is out with a very interesting commodities story on Thursday.
And it’s interesting on two fronts.
First, due to the information it carries and second, due to what the release of the information implies for the presumed anonymity of players in the oil futures market.
That’s because the Commodity Futures Trading Commission seems to have collaborated with the Journal in the naming of the biggest holders of long and short oil futures positions during the 2008 record oil spike.
Which in itself is quite out of the ordinary, since these positions would have been considered highly confidential by the market.
Yet, as the Wall Street Journal writes:
The CFTC never identified specific investors publicly, but The Wall Street Journal recently reviewed the list. It offers a rare glimpse of the secretive world of oil trading, where buying and selling often takes place away from public markets.
Banks such as Goldman Sachs Group Inc. and Morgan Stanley, which have long played a central role in oil trading, dominate the list. Also featured prominently are producers and consumers such as BP PLC and Delta Air Lines Inc., which buy and sell large amounts of oil products. A range of investors were in the market, too. Yale University, Singapore’s government, hedge funds Brevan Howard and D.E. Shaw & Co., as well as pension funds for Texas teachers and Danish workers all held positions, according to the list.
More specifically, the list shows that on June 30 2008. when West Texas Intermediate oil was trading at $140 per barrel, Goldman Sachs was holding 451,997 long WTI contracts and 419,324 short contracts (or a net length of 32,673 contracts).
Olivier Jakob, energy analyst at Petromatrix has crunched that figure and finds it implies an extraordinarily dominant position for Goldman Sachs:
If the WSJ is reporting the positions correctly this would then mean that Goldman Sachs, for its own and its clients positions, was holding 35.2% of the WTI Open Interest on June 30th 2008.
We must stress that we have not seen the list ourselves and therefore cannot independently guarantee the accuracy of the numbers quoted by the WSJ or their interpretation.
Though, in Jakob’s opinion that’s not even what’s important. The critical point, he believes, is that the CFTC is using the story to hint to the market that next time there’s a significant oil spike, the regulator will not hesitate to name and shame the biggest position holders.
As Jakob sums up:
…what is also interesting is that the CFTC is leaking this extremely confidential information to the mainstream media. One of the principle of trading futures is that your positions remain anonymous and it is extremely odd for the CFTC to start circulating lists of detailed positions by market players to the media.
Is this a warning sign from the US administration that on the next oil price spike they will throw to the street the names of companies holding long positions in crude in a finger pointing exercise? After an SPR release to try and cap oil prices we cannot exclude that the US Administration employs “non-traditional” measures to prevent a further oil price increase. This first leakage of extremely confidential information from the CFTC is certainly extra-ordinary and non-traditional.
These are the days of unconventional commodity regulation indeed.
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Update 1644 London time: Olivier Jakob says the CFTC has got in touch to categorically deny any involvement with the leaking the above information to the Wall Street Journal. They say it is incorrect to assume regulators are engaged in a name and shame policy. They also added that the CFTC would never leak this sort of information to the media. Of course, that doesn’t answer the question of who did leak the data. What’s more, from what we understand, there’s not a whole lot of people who would have access to it.
Related links:
CFTC targets funds in position-limit clampdown – FT Alphaville
EXPOSED: TERRORISTS NOT BEHIND OIL PRICE HIKE – FT Alphaville
Police called in to investigate oil price rise – FT Alphaville