There are a lot of rumors flying around the oil industry right now, and the financial news channels have no idea how to handle it.
One day, they'll be talking about OPEC abandoning its oil deal and letting oil prices fall.
The next, they'll be all over a drop in oil in storage in the United States, driving prices up. You'd be forgiven for not knowing what on Earth is going on...
And thinking you should just stay out of the energy market altogether.
But nothing could be further from the truth. In fact, today is a great time to get in. You see, there's a reason why oil prices nose-dived so fast two weeks ago...
And why they're recovering at record speed.
Here's what my contacts are telling me...
Why You Can't Trust the Mainstream Financial News
Last October, you saw what a French contact had shared with me about oil price manipulation. Now, "manipulation" is a serious word.
But so is what some companies are doing in the oil markets today.
You see, back then, the name of the game was betting on oil prices to fall and then scaring people to make it happen. The Chicken Littles from "The Sky Is Falling" brokerage, as I like to call them, have been making a handy profit this way for years.
Some of that still happens. When watching or reading financial news, always be sure to check whether the person selling you doom and gloom about oil has any personal stake in it. Too often, TV channels will require so-called experts to say whether they have invested in oil or oil companies, but won't ask whether they (or their families) are shorting oil.
The same goes for larger companies. Be careful when listening to an investment bank or hedge fund release its analysis on oil for free. Remember, these are companies. Their goal is to make money. If they are giving you their thoughts on where oil is going, you can bet they're hoping you'll believe them - and that they stand ready to profit if you do.
Investment banks, for example, are some of the largest short players on oil in the market. But trying to convince the public that oil is about to crash in order to make money off that crash is one thing.
The price manipulation my contacts are telling me about now is reaching a whole other level...
We've Not Seen Oil Price Manipulation Like This Before
Today's oil price manipulation, my sources tell me, looks different. Step one involves spreading rumors designed to send oil prices down. It doesn't matter how far-fetched they are, as long as they work. Maybe something suggesting that oil demand is crashing, or insinuating that OPEC's deal is about to collapse.
In other words, exactly the kind of rumors we saw in the run up to the oil "flash" crash in early May. And just as we saw then, these rumors have no connection with the underlying situation in the oil market.
But as long as enough people believe in it, prices go down.
That's when the manipulators step in and start buying up oil on the cheap. This oil goes into storage, preferably somewhere where that doesn't have to be reported. Then the waiting game begins.
As this oil is withheld from the market and the rumors dissipate, oil prices start rising again - just as they've been doing for days now. Once prices have recovered enough, the manipulators sell the "missing" oil they were hiding in storage at the new, higher price.
The telltale sign that this is happening is a rapid drop in oil prices on no real news and then an almost immediate recovery of prices. In short, exactly what we've seen these past two weeks.
But don't worry - it's the end of the road for these manipulators...
Why Oil Prices Are Headed Back Up
When oil prices briefly crashed two weeks ago, most hedge funds abandoned their big bets on oil going up. But few, if any, of them made bets on oil prices going down. Instead, the money that left the market is sitting on the sidelines, waiting.
That's a clear sign these shorts weren't based on the fundamental facts of oil supply and demand. Instead, they're based on the hope that manipulating prices will work.
This lack of new bets on oil falling spells trouble for the price manipulators...
And along with the extension of the OPEC deal to cap/cut oil production, which now has the support of both Saudi Arabia and Russia, it means oil prices look set to recover - and more - from here.
To see how high oil price will go, be sure to check out my oil price forecast for 2017 - and the most unusual way to play oil.
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The post Look How the Big Banks Are Manipulating Oil Prices Now appeared first on Oil & Energy Investor.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.