Cornering the Oil Market is Easier Than You Think

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On Tuesday, the CFTC accused a couple of obscure traders of trying to illegally manipulate the oil market in 2008. Here’s the gist:

In a matter of a few weeks in January 2008, the defendants built up large positions in the oil futures market on exchanges in New York and London, according to the suit, filed in the Federal Court in the Southern District of New York.

At the same time, they bought millions of barrels of physical crude oil at Cushing, Okla., one of the main delivery sites for West Texas Intermediate, the benchmark for American oil, the suit says. They bought the oil even though they had no commercial need for it, giving the market the impression of a shortage, the complaint says.

At one point they had such a dominant position that they owned about 4.6 million barrels of crude oil, estimating that this represented two-thirds of the seven million barrels of excess oil then available at Cushing, according to lawsuits.

That’s it? The excess capacity at Cushing is only 7 million barrels? So all you have to do to corner the market is use a bunch of subsidiaries to buy up about 5 million barrels of crude? That’s nothing. It’s $500 million or so. There must be thousands of hedge funds, investment banks, PE funds, or private investors who could pull off something like that. And the operation itself wasn’t exactly rocket science. I had no idea that manipulation of something the size of the oil market was so easy.

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DEMOCRACY DOES NOT EXIST...

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In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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