I think that the history of the BP/Goldman informal understanding/ partnership of the last fifteen years or so was firstly from the mid 90s to create excessive volatility in the market, and profit from that, combined with superior, and possibly (at high level) shared, knowledge of the physical/OTC market.
When hedge funds became price makers in the market in maybe 2002/3, Goldman and Morgan Stanley had already built the dominant (and opaque) ICE trading platform, and were far and away the biggest in prime brokerage.
While MS bought their own storage etc, which gave them the ability to operate in the physical market, I would imagine that it was Goldman's understanding with BP which gave them a parallel trading presence, by proxy.
Goldman have knowledge of fund order flow and positions from their prime brokerage, while when BP sold off most of their North Sea production they cannily retained ownership of the pipeline network, so they would have pretty good knowledge of North Sea loading schedules and storage levels.
Of course, the hedge fund trading business isn't what it was, but the flow in recent years of money into "less risky" exchange traded funds invested in oil and gas etc is IMHO what is behind the latest strategy.
Provided investors believe the Goldman hype (which never stops) then they'll keep lending money to the market and will continue to be "date raped"
Goldman Sachs' Magic Commodity Box
when they roll positions over month to month.
In terms of market manipulation, the BFOE market is too complex and opaque to know what exactly has been and is going on, but in substance I suspect that BP are able to utilise GSCI money to keep the BFOE price artificially high.
It doesn't actually take that much money to do it - as I pointed out to the UK parliament's Treasury Select Committee last year - and losses made on a few cargoes would be offset by profits made on everything else priced against the benchmark.
Although this won't play well with the US politicos who balme the futures markets, the NYMEX contract is now pretty irrelevant to global prices, due to the massive amount of Brent/WTI arbitrage.
Btw. The word I heard about the
PVM rogue trader
the other night was that his trading may well have been connected with such arbitrage games, and maybe attempts to trigger big "stop loss" orders on the ICE trading system.
I digress. The point is that although most financial traders have to pay big money for storage, BP and Goldman's unwitting fund customers between them are maybe able to monetise BP's oil in the ground, where the storage cost is zero.
The oil producers certainly aren't going to complain about excessively high prices, and of course none of this is visible to the rest of the market, in the same way that Hamanaka was able to keep his copper manipulation secret for years. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
