CME to Raise Oil Margins and Re-Elect Obama

CME) Group is raising margins on oil futures contracts 3.7% now that Brent Crude is solidly back above $110 per barrel.  With the Fed wanting to look non-partisan while it doesn’t engage the QE warp drive, trying to hold the line on the monetary base in an election year, President Obama gave that bastion of regulatory competence, the CFTC, the power to order margin hikes back in April.

The flood of U.S. Dollars washing up on the Fed’s shores from a thousand cuts to the petrodollar system is big enough that the Fed can’t won’t sop it all up which is allowing the S&P 500 (AMEX:SPY) to perform a low volume drift towards 1450 and possibly, if the flow gets big enough, even the all-time high of 1550 before the election.  This is certainly what the sitting President and any well-heeled NY Senators want while simultaneously going after London banks *cough* LIBOR *cough* like HSBC (NYSE:HBC) and Standard Chartered.

It will be interesting just how many margin hikes will be implemented during these next few months as we approach the election to create a disconnect between oil prices and equities.  Let it never be said that there is anything a politician won’t do to stay on the gravy train for as long as possible.

West Texas Intermediate Crude traded up to $93.37 by the end of the Thursday afternoon Globex session, while Brent Crude pushed up to $113.08 per barrel, just $12 shy of its first quarter high.

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Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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