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First, the US market is less prone to settlement rigging than the IPE.  WTI has a real, wet settlement.  You just can't screw with it too much or you get handed wet oil in Cushing OK and have to cope with it.  Not so much fun.  Or wet mogas/diesel in NYH on products.
Volumes are much larger, the number of players are larger and it's much more difficult to move the print much.  IPE is structurally flawed in that the smallest Brent cargo is 500MB vs the IPE contract of 1 MB.  No way to force a real physical transaction.

Secondly, you've yet to show me any evidence that the game playing is skewed only to the upside.  I saw just as many players taking the print down as up.  Most of what I did was real, wet oil without any exchange contract to mess with, but I sat with some of the big boys and watched them play.   It's easier to skew upward as the producers are happy to play along but the gamers need movement not a fixed offset in one direction.

third, the problem in the US isn't the last one tenth of one percent  on WTI.  It's the lack of competition in the refining and marketing area.  Hard to get excited about a nickel per bbl on crude when lack of competition is uping gasoline pricing by cents per gallon.  (our local Costco is 25 cpg or $10/bbl!!!!!!!! under the other retailers.)  The FTC letting all those mergers through has done far more to hurt the consumer than settlement manipulation.

As for acceptable manipulation.  It's a rough game as you well know.  But if the deals are being done in open outcry with all players and regulators seeing the trades, it's hard to bitch.  If those who feel screwed grew a spine and did their business fixed price instead of using settlements, the problem goes away overnight.  No one has a gun held to their head to trade in oil derivatives either.

Your Iranians/Norwegians could just put a fixed weekly price on their oil or sell it cargo by cargo.  They don't have the guts to make their own pricing decisions.  They'd rather term up their sales and complain about other people setting their prices before heading to the bar in the evening.  bunch of whining little wusses in my experience.  Abdicating pricing decisions to the IPE/WTI or Platts/Argus is the root of the problem.

by HiD on Fri Nov 10th, 2006 at 01:46:27 AM EST

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