How to get your 10 seconds of fame…

2008-01-06

Richard Moore

Original source URL:
http://www.truthout.org/docs_2006/010408O.shtml
http://www.guardian.co.uk/business/2008/jan/04/oil.economics

Vanity trade sent oil price to record high
€  Andrew Clark in New York
€  The Guardian, Friday January 4 2008

A maverick oil trader in New York has aroused the ire of colleagues by enacting 
a "vanity trade" which first pushed the price of a barrel of crude over the 
crucial benchmark of $100.

Richie Arens, an independent trader who runs a brokerage called ABS, bought 
1,000 barrels for $100 on Wednesday at a time when the prevailing price was 
$99.53. The price instantly settled back, although it jumped over $100 again 
yesterday, hitting $100.09 during the day before settling to end at $99.18.

Wednesday's trade appears to have made an instant loss of at least $500 - but 
market watchers believe Arens was motivated simply by being the first person to 
buy at more than $100. His actions have attracted criticism from experts who say
that it risked artificially triggering automatic "stop orders" placed by others 
in the event that the price hit $100.

Stephen Schork, editor of the Schork Report market intelligence service, said: 
"This could have triggered a massive artificial rally. It creates a doubt that 
these kind of shenanigans could be commonplace - you begin to question the 
validity of prices and to ask 'are these markets really working?' "

One floor trader, Ray Carbone of Paramount Options, told the Guardian it was an 
"unfortunate way" for the price to hit $100: "It's a very sensitive subject 
here. There are mixed feelings about it, to put it in the nicest way I can."

The New York Mercantile Exchange (Nymex) refused to comment.

The incident is potentially embarrassing for Nymex, one of the few "open outcry"
forums still operating, where traders use hand signals and scraps of paper to 
conduct deals. Schork said: "It sends a message Nymex doesn't want to offer. 
They've been telling the world that all the money coming to the market isn't 
causing undue speculation and that undue speculation isn't causing the price to 
rise."

Prices have been flirting with the $100 level for two months, pushed up by a 
tightening in supply by the Opec cartel and by political concerns in Iran and 
Pakistan.

Yesterday's 37 cent spike to $100.09 was prompted by inventory figures from the 
US energy department which revealed that stockpiles fell by more than the 
expected 4m barrels last week.

Carbone said: "It's a very volatile session here. The inventories are adding 
some strength. The market's digesting geopolitical events."
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