Newspaper article The Evening Standard (London, England)

Volatile Oil at Boiling Point as Frenzied Barrel Bets Bubble over; City Trader

Newspaper article The Evening Standard (London, England)

Volatile Oil at Boiling Point as Frenzied Barrel Bets Bubble over; City Trader

Article excerpt

Byline: ANGUS MCCRONE

HIS typical trade, one Home Counties-based investor tells me, would be "10 lots". That sounds modest, until an explanation is forthcoming: "That is the equivalent of 10,000 barrels of oil," he says.

He is not alone. This autumn, short-term traders have been drilling energetically for profits in oil markets that have remained volatile more than six months after the end of "major combat operations" in Iraq.

Speculative activity is evident everywhere, from the crude oil futures markets run by the International Petroleum Exchange in London and the New York Mercantile Exchange, to the smaller-scale environment of British spread betting.

"Volumes in oil have been very high," says Peter Martin, senior dealer at spread bookmaker IG Index.

"In recent days, we have seen perhaps twice as much business as we would usually expect in US Nymex, Brent crude and heating oil. Last week, it was mainly selling, but this week the buyers have come back in."

Figures from the IPE show September produced trading volumes in Brent crude oil futures of 2.2 million contracts, up 16% on the same month last year, with gas oil futures trading 822,000 contracts, up 17%.

Daily volume records in Brent crude at the IPE were broken on both 9 and 10 October.

This frenzied activity, from industry participants, hedge funds and individual speculators, might seem surprising given that the crises overhanging the oil market earlier this year - such as war in Iraq and production problems in Venezuela and Nigeria - have eased.

However, what has kept the pot bubbling has been a series of surprises, including last month's decision by the Opec cartel to cut production by 900,000 barrels a day and the fall in the dollar's value against the yen and euro over the past month.

Lawrence Eagles, senior oil analyst at the International Energy Agency, says: "When people fear a significant price move, it tends to lead to increased hedging activity by the oil industry. …

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