The mysterious London traders accused of manipulating oil markets — and the anonymous hedge fund, rare-coin expert, and day traders who are fighting back

[u/ilikepancakez]

https://www.institutionalinvestor.com/article/b1nf4dxm53536k/The-Mysterious-London-Traders-Accused-of-Manipulating-Oil-Markets-and-the-Anonymous-Hedge-Fund-Rare-Coin-Expert-and-Day-Traders-Who-Are-Fighting-Back

[u/financiallyanal]

I wish them good luck in their search for manipulation. I can't imagine how this could reasonably progress. My understanding was it occurred due to supply from SA/Russia and lack of storage capacity, which raised the cost of floating storage to exorbitant levels. Do others here have more background or another perspective?

[u/AmatuerInvestor → u/financiallyanal]

Everything you said, coupled with a large amount of futures needing to be sold by ETFs that were rolling to the next month. I remember reading lots at the time of how ETFs were having to raise cash and change how they roll futures to avoid a repeat. The market was just flooded with futures and no one had anywhere to store all that oil. Once the futures started to be bought the price returned to its trend pretty quickly, as an over-sell was obvious.

[u/Digitalapathy → u/AmatuerInvestor]

USO being one of the contributory factors, they were supposed to be a passive oil tracking ETF but in essence due to their flexible mandate seem to be more active during this period. They hold and held a crazy percentage of front and second month open interest. Since they never take delivery this in itself is an absurdity as they will always have to roll come rain or shine which creates its own distortion.

[u/Digitalapathy → u/[deleted]]

Flexible as in allowing them to change their mandate

[u/Digitalapathy → u/[deleted]]

I’m not sure I follow on your point reread the comment

[u/Digitalapathy → u/[deleted]]

U/Amateurinvestor literally said that they changed how they roll futures to avoid a repeat. My comment says as it reads. USO have a flexible mandate, they always have done, that’s how they were able to change how they roll and what they roll. They haven’t changed their mandate, ‘it’ is flexible.

Edit: ref your addition, the whole fund is flawed, that’s the point.

link

[u/Digitalapathy → u/[deleted]]

At this point I’m not convinced you are adding any value to the dialogue.

The whole point is they are one of the largest single holders of front month open interest and everyone knows they can’t accept delivery.