Bending the Third Rail
Because We Should, We Can, We Do
Tuesday, January 09, 2007
Oil Plunge
Isn't it interesting that while oil prices have been dropping, gasoline prices have not?

Anyway .....

Turns out our old friends at Goldman-Sachs (Treasury Secretary Paulson's old firm) have been at it again:
January 8, 2007 -- It might be a better idea to thank Goldman Sachs, not the weather, for the recent plunge in oil prices.

While recent balmy temperatures have certainly played a role in last week's dip in oil prices, a lesser known, but equally powerful, move by Goldman at the start of the year might bear some responsibility as well.

Goldman cut the energy portion by as much as 50 percent in some of the sub-indexes that comprise the widely followed Goldman Sachs Commodity Index, tamping down moves to buy them by large investment funds who mimic Goldman's index.

The changes took effect this month and apply for all of 2007, a Goldman spokesman said.

Crude oil futures plunged 9 percent Wednesday and Thursday to $55 a barrel, before settling Friday at $56.31. The two-day decline was the sharpest since December 2004.
Of course once the Goldman selloff of inventories is complete, prices will rebound.

Wonder why they're doing this? Tim Iacono suggests that it's because the Goldman model is predicated on production (more production = larger futures position). If true, their reweighting suggests that recent oil production is significantly down. I guess we'll know for sure in a few months.

Update: A bit more on what's happening in the oil markets.
Written at 6:13 PM by Greyhair.
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