Huge oil trading loss sinks energy trader SemGroup

[ben_meyers]

Source: Yahoo.com

By Robert Campbell
43 minutes ago



NEW YORK (Reuters) - A massive $3.2 billion trading loss on oil futures and derivatives sank high flying energy trader SemGroup LP, which at one time billed itself as the 14th-largest private company in the United States.

The Tulsa-based SemGroup shorted NYMEX crude oil futures to hedge against a decline in the value of the oil it purchased as part of its 500,000-barrel-per-day trading business, according to court documents, before surging crude prices forced it to recognize billions of dollars in losses on futures positions.

SemGroup was forced to recognize a $2.4 billion loss on July 16 after it transferred its NYMEX trading account to Barclays Plc (BARC.L). The firm had been recognizing this position as "loss contingencies," according to its bankruptcy filing in Delaware federal court.

Included in the NYMEX losses is $290 million owed to SemGroup by a trading company owned by its founder and former chief executive Thomas Kivitso. SemGroup placed Kivitso on administrative leave on July 17.



Read more: http://news.yahoo.com/s/nm/20080722/bs_nm/semgroup_dc_1

---

One of the speculators gets burned playing the game. It may only be the start, one can only hope.

BTW, oil has been down $5 a barrel today.

[madrchsod]

1. "and the walls come tumblin` down.."

i feel so sorry for those poor speculators

[The Doctor.]

24. I do not.

Suck on it jerkwads.

[Parche]

2. Serves Them Right

:woohoo: :woohoo:
:hi:


The Enron loophole in oil trading.........:grr: :grr:

[liberal N proud]

3. What was that POP that I just heard?

Can you say OIL BUBBLE!

[depakid]

11. as others have pointed out, they were short selling

meaning they were betting on the price to drop.

So we might want to temper our scheudenfraude just a bit.

[girl gone mad]

26. Shorting actually helps add to the demand.

At least temporarily.

[DCKit]

27. They started shorting a couple of weeks too early.

Apparently, not everyone got the memo. It's the threat of regulation, even prosecution, of commodities trading that's currently driving the price down. We've been howling long enough that Congress is beginning to take us seriously.

Unless you believe that China and India have suddenly cut their oil purchases or that there is a sudden glut in the market - neither of which has has much influence on the price we're paying at the pump or grocery store.

Regardless, this validates the commodity theories. BTW, anyone know how much profit they made in the past three years betting on the ever-increasing price of a barrel? I expect some percentage of the people involved in their trading will never have to work another day.

[n2doc]

4. Of course they got burned SHORTING oil

The vultures spinning it upwards are still to be nailed.

[Kelvin Mace]

5. What logic prompted these idiot to

short oil? With Bush in Office?

Oh wait, did these idiots actually BELIEVE that shit about $11 a barrel oil?

[Tandalayo_Scheisskopf]

6. Every time an Former Oil Speculator sleeps in a dumpster...

An Angel earns its wings.

[frylock]

8. !!

thanks for the laugh!

[Outlier]

13. THEY WERE SHORTING OIL

So you take out one of the speculators who thinks that crude is overvalued and should get cheaper in the future, you're left with a market that on average is more heavily weighted with people who think it should go up. Anyone who shorts the oil has to take more risk NOW and is more likely to bail on their positions now that one of their own (short sellers) has gone down. I don't see anything funny about this, they were pushing the market down. Gas prices are high enough.

[WattleBreakfast]

7. This is like catching a speculator

and the industry of speculation red-handed right?!

:party:

And nobody else cares out side of us...

[dysfunctional press]

19. actually- they were betting on the price to go down...

they weren't trying to trade the price UP.

[Orrex]

9. Has our Democratic Congress bailed them out yet?

Just wondering...

[wordpix]

10. quick, BushCo, bail them out with billion$ from taxpayers & no conditions on the "loans"

:sarcasm: just like you did with the investment banks to help them out with their risky loans.

[seriousstan]

12. 2300 employees and providing a much needed service. they shorted fearing a FALL in oil prices

because they store and transport 500,000 barrels a day. THEY ARE NOT IN THE SPECULATING BUSINESS any more than your neighborhood gas station is. Farmers are known for doing a form of this by selling and buying contracts before harvest. It had nothing to do with driving the price of oil up. It actually would have attributed to a downward weight.

Sometimes the knee-jerks around here are short a knee.

[pampango]

18. I hope those aren't facts you are throwing like a wet towel on this

"bash the speculators" party. Life here is much simpler if we can just call these people "speculators" (though they were hoping that oil would go down in price, not up) and not really worry about the 2300 jobs and the details about the business. ;)

[CountAllVotes]

14. these "speculators" (aka crooks!)

are one of the reasons prices are so high. Get rid of them first, then go after ANWAR!!

:argh:

:kick:

[ret5hd]

15. uhhhmmm...these particular speculators were betting oil would go down, not up.

just sayin'.

[CountAllVotes]

17. it doesn't matter

just the fact that they are there doing this - it adds to the tension around this problem, thus the price is escalated or can decline very quickly as hopefully someone will see. I don't care if it was a win/lose outcome.

[cliss]

16. This is just.....weird.

Let me get this straight.
An oil futures company is betting that oil prices will come down.
How could they possibly have thought such a thing?
Did they not have ANALYSTS on their payroll, just go to the DU or Daily Kos then if they were that poor. Anybody could have told them the price of oil was set to go up, based on the following factors:

a) supply of light sweet crude is debatable, not sure about Saudi Arabian supplies.

b) demand for oil would go up, up up with no end in sight.

Oil analysts working for the petroleum companies have published reports which have stated the obvious. Also government economists and other analysts have written hundreds of reports all this is freely available if they cared to look it up. This was not rocket science.

This story just doesn't match up. Maybe the officers looted the company.

[seriousstan]

21. They are not an oil futures company. They are an oil transport and storage company.

[raccoon]

20. self delete Somebody beat me to the post. nt

[aspergris]

22. There is a myth in DU (and elsewhere)

That hedge funds ONLY make money.

EVERY week, hedge funds fold/go bankrupt. Some make $$$$, some lose $$$.

It is not , contrary to DU CW, a bunch of people who are all making money at other's expense. I can't tell yuo how HARD it is to manage a hedge fund. I've done a fair amount of oil and futures trading, and it is NOT easy.

Another thing people don't understand is that futures markets (unlike the stock markets) are ZERO SUM.

Within the oil complex futures market, for instance NO AGGREGATE MONEY is made or lost on any given day. the losses = the gains (and that's not including commissions).

Futures markets (and options etc.) differ from non-zero sum markets, such as the stock market, in that for every long position, iow X contracts long at a given price point, there HaVE TO BE exactly the same amount of contracts held short. Again, TONS of money is LOST by speculators (and hedgers and commercials) and tons is made.

The stock market can (and has) built HUGE amounts of wealth over the years. BUILT it. Futures markets don't work that way. NO wealth has been built. It has merely exchanged hands.

People resent the hedgies that make 7 or eight figures, but don't understand there are many others that lose that much or more.

Markets don't move because they WANT to, they move because they HAVE to. And when you see big moves *up or down* you can be assured, huge amounts of money was won (by some) and lost (by some).

[izquierdista]

23. Got to know when to hold 'em

Know when to fold 'em
Know when to walk away
Know when to run.

[Stinky The Clown]

25. Cry me a river ...........

....... a stream?

....... a brook, maybe?

....... how about a trickle?