What stops oil producing nations from creating proxy companies and purchasing oil contracts from themselves? Meaning, does the CFTC have a verification mechanism to guarantee that contract volume matches physical output? Also, is there any history of someone trying a similar mechanism like this on other commodities?
2007-03-14 05:11:45 · 2 answers · asked by Anonymous in Business & Finance ➔ Investing
Thank you for your response. Yes, I understand Opec quota limits. Rumor has it that this technique was used during the Jan 07 thru Feb 07 timeframe by Saudi Arabia funded proxy companies. It would be very interesting to look at the physical volume/producer/buyer details, but only the CFTC has this info.
2007-03-14 07:00:52 · update #1
What stops the oil producing nations from doing that is that they don't have to use subterfuge to manipulate oil prices. They blatantly manipulate the market by colluding on production numbers to control pricing.
2007-03-14 05:43:27 · answer #1 · answered by BosCFA 5 · 0⤊ 0⤋
There's nothing that ties contract volume to delivery. In fact, forward contracts are more often than not liquidated for cash, rather than actual delivery.
Opec controls actual production, hence can set their own price without the need to resort to derivative manipulations.
2007-03-14 12:12:32 · answer #2 · answered by anywherebuttexas 6 · 0⤊ 0⤋