Oil Traders Misread Tweet, Make Oil Prices Shoot Up

from the read-slower dept

Thu, Oct 10th 2013 3:03pm — Mike Masnick

There have been plenty of complaints about people who jump to conclusions too quickly online, but apparently at times that can actually have a material impact on things. Earlier today, the Israeli Defense Forces (who have been quite active on Twitter) put out a tweet commemorating the famed Yom Kippur war of 1973, in which Israel bombed Syria:

Oct. 10 #YomKippur73: Israel Air Force bombards airports in Syria to prevent Soviet weapons reaching the Syrian Army http://t.co/tKnMzYjgFF
— IDF (@IDFSpokesperson) October 10, 2013

The tweet may have been somewhat ill-timed, and poorly thought-out, given the current "heightened tensions" with Syria. Either way, apparently some oil traders either skipped over or didn't understand the hashtag reference to "YomKippur73" (and the reference to the Soviet Union -- a country that hasn't existed in decades) and interpreted the tweet to mean that Israel was bombing Syria today. And, in response they started bidding up the price of oil. Because twitchy commodities dealers apparently do their pricing based on tweets.

Of course, the article notes that traders eventually realized their mistake... but the price of oil stayed up, rising over a dollar from $110.40 a barrel to $111.50 a barrel, and then continuing to rise a bit (though more slowly) after the mistake was understood. Isn't it great that key pieces of the global economy can change based on some people totally misreading a tweet? Makes me feel so comfortable about the state of the world today.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: israel, misreading, oil prices, reading comprehension, syria, twitter

20 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

silverscarcat (profile), 10 Oct 2013 @ 3:19pm

Yeah...
This goes into the WTF folder.
[ link to this | view in thread ]
This comment has been flagged by the community. Click here to show it

out_of_the_blue, 10 Oct 2013 @ 3:48pm

Big deal. 2001 when Bush came in, oil was under $50.
So going to war in Iraq to guarantee the "free flow of oil at market prices" costs you at least a $1.50 every gallon, from now on.
[ link to this | view in thread ]
ECA (profile), 10 Oct 2013 @ 4:08pm

sORRY
OIL AND UTILITY ITEMS SHOULD NOT BE ON THE MARKET..
They should NOT be products bought and sold until they HIT a top price.. THIS is middle men fighting over WHAT THEY THINK they can charge.

Look up the price of SUGAR on the market..now goto the STORE and see how much markup you are paying. AND sugar is a CLOSED MARKET.(HIGH IMPORT tax)

there are to many MIDDLE MEN..
[ link to this | view in thread ]
nasch (profile), 10 Oct 2013 @ 4:16pm

Re: sORRY
OIL AND UTILITY ITEMS SHOULD NOT BE ON THE MARKET..

What's the alternative, government setting the price?
[ link to this | view in thread ]
nasch (profile), 10 Oct 2013 @ 4:18pm

Soviet
(and the reference to the Soviet Union -- a country that hasn't existed in decades)

It didn't refer to the Soviet Union, but "Soviet weapons", and there are still plenty of those out there.
[ link to this | view in thread ]
Anonymous, 10 Oct 2013 @ 4:22pm

Well, whaddaya know. They've finally found a new excuse for a rise in oil prices.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2013 @ 4:23pm

Re: Soviet
That'd be Soviet era weapons not Soviet weapons, given the Soviet Union does not exist to own any weapons.
[ link to this | view in thread ]
ECA (profile), 10 Oct 2013 @ 4:36pm

Re: Re: sORRY
nASCH..

Its called BUY IT, add your markup 1 time and sell it..

NOT BUY AND SELL back and forth 4-10 times until its over priced. Do you KNOW the actual price of OIL in most countries? the Price the CORP pays? then sells it AGAIN, and that company sells it AGAIN??
I wont tell you, as it is very hard to find..and I havnt seen it in 5 years. I will say that its NOT $100 per barrel. its NOT $50..

The stock market IN THE OLD days had 2 things going for it..
1. it was ON FARMING GOODS..
2. you had to TAKE possession of the GOODS before you could sell it.

Potatoes in the USA are
[ link to this | view in thread ]
Jim G., 10 Oct 2013 @ 4:40pm

Re: Re: sORRY
Right, because we all trust the well-reasoned, carefully thought out, good mistakes of government officials as compared to the irrational badmistakes of private individuals.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2013 @ 5:09pm

Re: Re: Re: sORRY
oUTRAGEOUS..

DID YOU KNOW that 80-81 per CENT of oil CORP industry profit funds the MEXICAN JEW LIZARD PEOPLE responsible for U.S. govt shutdown?? MSM dosnt want YOU to KNOW..! thank god for infowars.com

RAND PAUL discovers one weird TRICK to HARVEST OIL ($$$) from your own hair! Wake up sheeple
[ link to this | view in thread ]
radix (profile), 10 Oct 2013 @ 5:19pm

Try again Reuters
"Front-month Brent crude prices rallied from $110.40 a barrel at 10:20 a.m. EDT -- just before the Tweet -- to as high as $111.50 just after 11 a.m., as trading volumes rose. By 1 p.m. oil was up $2.68 a barrel to $111.74, its highest in a month."

If at one point was up 2.68 to 111.74, then it opened at 109.06. Further, if trading opens at 9am, then in the first hour - BEFORE THE TWEET - it was up 1.23%. In the hour after the tweet, it went up almost exactly 1%. In other words, there is absolutely no evidence to suggest that the tweet had any effect on the prices.

This seems like a 'blame the scary technology' article more than any real story.
See also
[ link to this | view in thread ]
radix (profile), 10 Oct 2013 @ 5:25pm

Re: Try again Reuters
Oops, left off my closing argument:
http://markets.ft.com/research/Markets/Tearsheets/Summary?s=IB.1:IEU
(May have to change view to 3 or 5 days to see the recent trend)
There is no spike in the price at the time of the tweet, and the only rise for the first part of the day was correcting for the previous day's downturn at the end. Once again, no story.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2013 @ 5:26pm

I've said it for years: we have not lived in a free market system since the 30's. Every bag of wind howling and heaving about "duh free market!" and "muh capitalism!" is a useful idiot at best and a politician at worst.

It is like this with every commodity. The prices aren't even mathematically soluble to give the greatest profit. They're merely fabrications that are made "within reason" to trick people into thinking some form of global trade system is at work and not a collection of ultra-influential traders pulling numbers from a hat that become the price of goods and services that we need to function as a society. If they reflected their actual values, the cost of living almost everywhere would plummet.
[ link to this | view in thread ]
Spaceman Spiff (profile), 10 Oct 2013 @ 6:57pm

In the words of one of my former options trading gurus
Sell! Sell! (short) Betting on the backlash...
[ link to this | view in thread ]
Lochar, 10 Oct 2013 @ 7:16pm

Re: Yeah...
High speed trading algorithms. They have a certain amount of trust set for certain Twitter accounts and keyworded on bomb and Syria.

Instant buy commands sent.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2013 @ 8:03pm

Re: Re: sORRY
The oil commodity market was created so airlines could stabilize the costs of fuel. Now it is controlled by the traders who often trade in"dark markets" without any transparency or external controls.

Make the traders take possession.

And make retail prices run on a 100 day average.

Speculation would disappear overnight!
[ link to this | view in thread ]
ECA (profile), 11 Oct 2013 @ 12:35am

Re: Re: Re: sORRY
There are to many middle men.
Oil corps will tell you, the reason they sell OIL over many other products, is that ITS CHEAP.
You should understand what a cracking tower does..
It takes a Liquid as thick as molasses..and coverts it to Liquids, gases, and solids.. by the time they are DONE..its at LEAST 100 to 1.
Got a refillable lighter..look at the price, and THAt isnt a gallon.
Propellant in most Spray cans..1oz in 16, and most of the price is in propellant.(look on a shelf to the Straight liquid you MIX GALLONS)
I wont mention Plastics, roofing, ROAD TAR, and all the rest..
Even if they sold that 55gallon drum at $1 per gallon, after processing, it would be worth over $5500. they make LOTs more then that. GAS pays for the whole thing and the rest is PURE PROFIT.

Your electric company SELLS electricity..They MOSTLY dont make it. thats ANOTHER company.
They sell it back and forth, until it wont go up anymore and have to use it..Then CHARGe the customer for all the games. along with PROFIT.

If you could BUY direct from the farmer you would pay about $3 for 100 pounds of potatoes..
Even if you could Buy direct from the original food processor..It wouldnt even TOUCH $0.50 per pound..
[ link to this | view in thread ]
Ninja (profile), 11 Oct 2013 @ 5:46am

Speculation. It should be a crime.
[ link to this | view in thread ]
Pragmatic, 11 Oct 2013 @ 6:10am

Re: we have not lived in a free market system since the 30's
Thank you!!

Ya hear that, Big L's?

No amount of pretending it is true and acting like it's true is gonna make it true!
[ link to this | view in thread ]
vastrightwing, 11 Oct 2013 @ 8:09am

Re: Re: sORRY
Commodities or futures contracts should be there for the producer to be guaranteed a market. You should not be allowed to sell the contracts once you've bought them. Once you agree to buy a future contract, you should be obligated to take delivery of the goods.

There is no society benefit to trading the contracts. All it does is cause the price to go up. There is no value to anyone there, other than the traders who manage to skim price differentiation.

I'm sure GS can give us a nice rationalization of how this practice gives the market liquidity or some other nonsense (AKA front running... sorry, I meant high frequency trading).
[ link to this | view in thread ]