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The Oil Market


The Market Triggers

The end of Open Outcry and Electronic Screens Trading

Speculations on the stock exchanges are not something new, it dates back to 17th century in Holland , but what is new is the new trading platform called HFT ((High-frequency trading is the use of powerful computers to transact a large number of orders at very fast speeds. It uses complex algorithms to analyze multiple markets and execute orders based on market condition. "stop-loss order and other computerizes strategies ", to limit losses.)

in the past “ Open Outcry”, method of communication based on allowing traders to speculate based on physical contact between buyer/sellers to assess Market “Sentiments” , motives or intentions and adjust their positions accordingly . As of 2010 most stocks and futures contracts are no longer traded using open outcry fingers This started changing to the use of smart phone trading and then electronic trading systems .Now even these are disappearing and are replaced by HFT Computers/HFT computers

These Mathemeatical Algorithem are based on “ Minimisation of loss ,which triggres off according to clever set of rules. The new financial institutions with riskless ultra high frequency trading algorithms completely dominate the market. The Market curve are no longer cyclical, it shots up like a rocket and drops like a stone with high frequency and amplitude.

These, new financial institutions with riskless ultra high frequency trading algorithms completely dominate the market. The existing near “war-time inventory “ of petroleum helps to insulate the supply of physical interruption of crude from the prices of the paper barrels . These algorithms, in a thin market , are becoming increasingly perfect tools for market manipulations .

Opec and non-Opec

OPEC and non-OPEC producers were practically pushed on the side line as spectators until the failed attempt of Russian On April 17th, 2016 in Doha meeting(Click Here)putinking to bring consensuses between the major Oil producers . However, after extensive efforts by Vladimir Putin , Russia finally succeeded to convince some OPEC member countries of the high cost of disagreeing in the Oil Market. After the Algerian meeting, we witnessed double price escalations within 12 days ,the first was ,after the opec meeting on 30 Nov, followed by The meeting between OPEC and Non-OPEC on 10-12 December,2016,

Wisely, Saudis pulled out from Production freeze talk with Russia on the ground “ Let us agree among ourselves in Opec first before talking to non-OPEC”,.which created two meetings and two price escalations. Also , a warning from Saudi Arabia that "If we can’t come to an agreement, then the other scenario of rolling over and waiting for the market to recover on its own is not a bad outcome." ,

The Opec effort was intended to reduce the “Speculative Inventories”, but on the contrary it increased it (see graph-c)and encouraged the commercial inventories to move into speculative stock and into the oil market as products ..Each of the two meetings (30th November 2016 and 10th December 2016), the speculators expected a success and stocked more crude ( at $40-$42 prices ) bring the stock level in Cushing to a new height of 67.5 million Barrels from an already high level of 59.5 million barrels .This took prices to a new level of above $55 within hours from $43. These cheap crude oil inventories are like a time bomb that could explode leading to similar result to that of March price collapse See the graphs

Slilence is golden

putin With this high level of inventories, the crude oil prices are exempted from the low of supply and demand . therefore the Speculators will continue to dominate,because it is based on “ buy rumors and sell news” ,this will , with the help of the media, to a situation where many financial institutions and brokers and even some oil officials into this booming market., through benefiting from an appropriate market statistics or statements Any speech or statement will be costly because the HFT are waiting ready to take the prices to any level they want. Look at the graph-B.On 3 a statement from Kuwait to the effect that they are sticking to their quota pushed the prices up … but only few hours later another nasty statement from another major OPEC country brought the price down …..The opec production freeze is not as important as the fact that the group have agreed to put aside their political differences and work jointly with Non-OPEC to balance the market The futures market, today works on ‘mathematical algorithms ‘.Most investors are using almost the same strategy “Stop-Loss” ….. Minimization of loss…. This is what happened in the market few days back when the Euro appreciated from 1.03 to 1.06 within minutes and droped like a stone ..

This means that the market is more responsive to rumors than ever before. We ask ,what should be the stragey in a market dominate by mathematical triggers?Unless you are a knife juggler,The market , now is so dangerous, it is like trying to catch a falling kinfe.