Newspaper article THE JOURNAL RECORD

Oil Giants Follow Lead of New York Mercantile Exchange

Newspaper article THE JOURNAL RECORD

Oil Giants Follow Lead of New York Mercantile Exchange

Article excerpt

NEW YORK - When the international oil cartel announced last weekend that it was determined to maintain its market share - even at t he expense of price - oil traders around the world looked to the New York Mercantile Exchange to see what prices would do.

It hasn't been that way for very long.

In less than three years, the Merc has drawn the attention of oil traders around the world - much like its neighbor, the Commodity Exchange, has stolen the thunder from London and become the world's dominant gold market.

John Licthblau, president of the Petroleum Industry Research Foundation in New York said the futures market is not yet a major instrument for the world's largest oil companies, but ""They're all influenced by it and follow it.''

Tom Burns, assistant general manager of the economics department of Chevron Corp., in San Francisco, said ""We as a company are not very heavily involved in the Merc markets.''

But Burns said major oil companies might be more inclined to use the futures markets after the historic gyrations in oil prices last week.

Burns said he felt the volatile markets this week ""will certainly be a test of the (futures) market's ability ... to cope with rapid change.

""If the market is still robust and resilient after a test like this, it will certainly add to the role the market plays.''

Lichtblau, who's been an oil analyst for 30 years, agreed.

""It's probably going to make the Mercantile Exchange more important in a way, because you have this tremendous volatility of prices and when you have that there is more interest and more need for a futures market.''

Hedging in the futures market is something the nation's farmers have known about for more than 100 years but the oil industry is still testing the waters. …

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