Oil Traders Misread Tweet, Oil Prices Spike

cartechboy writes "Ahh Twitter. Sometimes when you combine lightning fast information distribution and humans, minor (or not-so-minor) chaos can ensue. Yesterday, the Israeli military tweeted a commemoration of the 40th anniversary of the Yom Kippur war, which took place in 1973. But the tweet referenced the bombing of Syrian airports by Soviets, and oil traders, already an antsy group, assumed the tweet referred to an attack occurring that very moment. As you can imagine, this had some impact. Within an hour, the global price of oil jumped more than $1, from $110.40 to $111.50 as trading volumes soared. In the end, the traders missed a few things that would identify the tweet as historical vs imminent: Yom Kippur was weeks ago, the Soviet Union is no more, and most important, #checkthehashtag."

Comments

#idiots

[Anonymous Coward]

Anyone getting their investment advice from Twitter deserves what they get.

Re:#idiots

[arbiter1]

yea but you realize that price spike just get passed down to end customer right? so their screw up is just passed along to someone else to pay for.

Re:#idiots

[Anonymous Coward]

True for investors, but not for trader and speculators, which is what most "investors" actually are. Market speculation is about psychology and information availability, and if you're going to play that game, you damn well should follow Twitter.

Re:#idiots

[jonbryce]

A $1 movement in oil price is just noise as far as real buyers of oil are concerned. In any case, they buy their oil on the futures market, not the spot market.

Re:#idiots

[Anonymous Coward]

Why not, it's not like traders play with their own money. BEEEEEEEEEEEEEEEEEAILOUT!!!

Re:#idiots

[Anonymous Coward]

Maybe they meant that you don't need to mail heavy books to distribute information hence lightening the distribution?

Re:#idiots

[litehacksaur111]

The traders actually make money on this though. The oil companies will also make more money from refining the oil. It is we the consumers who will lose money.

Re:#idiots

[228e2]

Technology-wise, twitter is the same as any RSS feed, so why alienate Twitter?

Re:#idiots

[davester666]

Yes, the real question is why are oil prices so high, when there has never been such a glut of oil on the market, with the largest proven reserves, ever.

It is also as if there were some organization like debeer's for oil...

Re:#idiots

[Samantha Wright]

Just so we're on the same page—you do know about OPEC, right?

Re:#idiots

[Anonymous Coward]

Then short oil futures. If you are so sure its a bubble, it will come crashing down and you can make money off of it. If you don't short oil, it shows you don't have confidence it is a bubble and that maybe the price is up there for reasons you don't fully understand.

I have used this strategy before and made a killing from it. Many times things are bubbles or wrongly smeared in the news and you can buy/sell and put your money where your mouth is. I personally wouldn't short oil because there are things that cause its current price that I don't know. Since you are an expert you should have no hesitation in doing so, if you don't that shows you are not the expert you think you are.

Not trying to be snarky, but trying to make the point that you can run your mouth off for free without consequence.

Re:#idiots

[captainlavender]

Oh, absolutely. But the dark side of this one is all the people affected by it who don't deserve to have their cash hinge on someone else's obvious mistake.

Re:#idiots

[tlhIngan]

Anyone getting their investment advice from Twitter deserves what they get.

The problem is, twitter and facebook tend to be one of the first places where news breaks out first, and investments often follow the news.

In the race to figure out what the market is doing earlier and earlier, ignoring places where news breaks out first is folly.

Of course, the flip side is that getting the latest and greatest news means very little has been checked and may not even be accurate.

Re:#idiots

[thegarbz]

Proven reserves are variable and depend on price. i.e. if the price of oil dropped down to $50/bbl then it's no longer profitable to crack tarsands and the so called proven reserves go down.

The high proven reserves are part of the high dollar. A lot of this stuff is either shit (sour, acidic, heavy) or is in hard to reach places which would be worthless if the the dollar wasn't lower. This is the same reason why "peak oil" would never actually resemble a peak.

Re:#idiots

[sjames]

Yes, but OPEC doesn't control the majority of the oil out there.

Re:#idiots

[petman]

Yes, but OPEC doesn't control the bulk of the oil out there.

"Majority" is used for countables. Use "bulk" for uncountables.

Re:#idiots

[Anonymous Coward]

Pretty much. What we are talking about here is closer to gambling than investing.
The game that these players play has more to do with predicting how other players will react than what actually happens.

Regulations and taxing should be done accordingly.

Re:#idiots

[K. S. Kyosuke]

Anyone getting their investment advice from Twitter deserves what they get.

I'm sure the IDF bought some oil futures before submitting the tweet just to be sure. :-)

Re:#idiots

[sjwt]

And this is my first day Sans mod points for ages...

Well said

Re:#idiots

[SYSS Mouse]

You mean the computers that handles high frequency trading?

Maybe not

[djupedal]

" the traders missed a few things "

Maybe it was intentional - I'm sure someone profited, after all.

Re:Maybe not

[Anonymous Coward]

Only if Wile E. Coyote was one of the investors who profited.

Re:Maybe not

[adamchou]

Within an hour, it had jumped more than $1, from $110.40 to $111.50.

it jumped 1%. that's hardly significant. in fact, that's just pretty regular. this is a stupid article. who the hell approves this crap?

Re:Maybe not

[Princeofcups]

it jumped 1%. that's hardly significant. in fact, that's just pretty regular. this is a stupid article. who the hell approves this crap?

I wouldn't mind a daily 1% increase in my wealth.

Re:Maybe not

[Anonymous Coward]

Timothy

Re:Maybe not

[adamchou]

all the various investment markets jump or decline well over 1% on a regular basis. there's your change, go get em.

Re:Maybe not

[Anonymous Coward]

In fact, that's pretty close to the minimum amount of change we see each and every day.
http://oilprice.com/commodity-price-charts?1&page=chart&sym=CL*1&name=Crude%20Oil%20WTI

Re:Maybe not

[kick6]

Within an hour, it had jumped more than $1, from $110.40 to $111.50.

it jumped 1%. that's hardly significant. in fact, that's just pretty regular. this is a stupid article. who the hell approves this crap?

We're not allowed to make fun of wall street assholes getting caught being assholes because they amount doesn't meet some unmentioned asshole percentage?

Re:Maybe not

[Anonymous Coward]

It's 1% of the price, but 10% of the way there to trigger a price limit halt in trading for five minutes, according to CME rules.

Re:Maybe not

[Richy_T]

Yeah. Try investing in Bitcoin. It's not unusual to see a 1% shift not only before breakfast but also during and after. Heck, it can shift 2% just while you're getting the milk from the fridge.

Re:Maybe not

[GoodNewsJimDotCom]

I'd pass on having my money increase by 1% each day. I have major student loan debt problems.

Re:Maybe not

[Anonymous Coward]

That would be nice. The best I've been able to find is 0.4% per day with a crapton of risk: Bitcoin. Over the past week, the market value of a bitcoin has been:
$121.9 (Sun)
$122.3 (Mon)
$123.7 (Tue)
$125.2 (Wed)
$125.8 (Thur)
$126.7 (Fri)
$126.9 (Sat, estimated)

This week suggests average growth of nearly 0.6% per day but this is faster than normal. Taking an average over a number of years yields just 0.4% per day.

Re:Maybe not

[Nikker]

This. With all the aggregate data used in the day to day life of a trader how exactly does this one tweet become the defacto reasoning for the price change?

Re:Maybe not

[tompaulco]

How old is your post? I haven't seen bitcoin at those levels in months. Even when whatsis name from silkroad got busted, it dropped down into the 130s, but went back up to 140 pretty quick.

Trading term

[Citizen of Earth]

Since I am a longer-term investor and not a twitchy day-trader, this kind of thing doesn't affect me at all. The great thing about the stock market is that it is instantly and severely self-correcting. I just wish I could get in on more of these mis-pricings on time, as these failures are usually excellent opportunities, if, as I said, I watched the markets every second of the day.

Re:Trading term

[Anonymous Coward]

"I just wish I could get in on more of these mis-pricings on time,"
That would make you a twitchy day-trader.

Re: Trading term

[coffbr01]

Not sure if it was clearly stated, but High Frequency Trading algorithms should take most of the blame. Computers ran by investment firms monitor social media and invest accordingly, so you don't have to actually watch the ticker with your finger on the button. Large funds you have (401k, IRA) are likely already doing this for you.

Re: Trading term

[MightyYar]

I'm not sure it was computers. While it is conceivable that they have written a twitter bot that waits for news from Israel about conflicts in the Middle East, I'm not sure that the Israeli military Twitter feed would be a source of timely information in case of an actual attack.

Re:Trading term

[MickyTheIdiot]

I do the "dollar cost average" thing, putting some money in every paycheck. I specifically don't read my account statements except once a year or so for this reason. The stock market always goes up in the long term. Even if it drops for a year it'll be fine. I won't be taking money out until I retire, and that won't be for at least another 25 years... it's best to not pay attention, in my opinion.

Re:Trading term

[Anonymous Coward]

The great thing about the stock market is that it is instantly and severely self-correcting.

Is that sarcasm?

Re: Trading term

[Anne_Nonymous]

>> Computers ran by investment firms monitor social media and invest accordingly

Yes, but they are no match for my random headline writing bots.

Re: Trading term

[Sarten-X]

HFT doesn't take an hour to move 1%. I've worked in a financial firm, in the trading department. What takes an hour is for the head advisor to misunderstand something, make a (snap) decision, and pass it to the account managers, who count up how much of the investment to trade, and pass the numbers on to the trading desk, who calls in the trade, and it's done a few milliseconds later.

Seeing that much money move at once is what triggers the HFT algorithms, which will then buy and sell the commodity across different markets. The price will fluctuate a little as the HFT algorithms jump around waiting for the big rush of traders, but when it doesn't come, they move on elsewhere.

Without an actual war, it's unlikely very many investors would rush to buy oil, so the HFT algorithms would just increase the trade volume, but wouldn't move the price very much at all.

Re: Trading term

[anubi]

Sure sounds hackable. Just a few bytes of information relayed through Twitter could make the instigator a lot of money from people who willingly sign their resources over to them.

Re:Trading term

[Klinky]

I believe the actual term for someone who uses Twitter rumors for stock trading is "twit".

Re:Trading term

[Ol Olsoc]

The stock market always goes up in the long term.

Oh yes.

Even if it drops for a year it'll be fine. I won't be taking money out until I retire, and that won't be for at least another 25 years... it's best to not pay attention, in my opinion.

That's a little simplistic. I know many folks who were just about wiped out, right around the time they retired. Yes, the market always goes up. And that is an awesome investment strategy if you are going to live for 200 years. For us mere mortals, where it's at when we retire - or move it into less volatile investments is much more important.

If you plan on moving your investments into something more conservative at some point, where is the market going to be at that point? I know one fellow who hung on a bit too long, and was bit hard twice.

I lucked out and went conservative pretty early on - way too early for most. I was an imbecile for about a decade. Sad to say, my smart colleagues who knew the market only went up in the long run are now planning on working into their 70's. Hopefully they will be allowed to do that. Me, I retired on my terms at 56.

Invest well, save well, live well, but well below what the economic forces tell you to.(real estate people, investment people, banking people) Pay attention to your stocks. Constant monitoring is only a problem if you get greedy, and too many people cannot not be greedy. The vampires and leeches feed on that greed, and do a slam bang job of extracting your wealth.

Re:Trading term

[ShanghaiBill]

The stock market always goes up in the long term.

If you invested your money in stock markets a century ago, it would have been a relatively poor investment. The United States of America was the "winner" of the 20th century, both militarily and economically, so of course the American stock market was a very good investment. But without the benefit of hindsight, you would have had no reason to know that. A century ago the "hot" stock markets were Argentina and Russia, while the "safe" market was Germany. Well, $100 invested in 1913 Russia or Germany would be worth $0 today, and Argentina would not be much better. So which stock market is going to be the "winner" of the 21st century?

Re:Trading term

[Captain Segfault]

Putting money in every paycheck is great and exactly the way to go, but isn't "dollar cost averaging". Dollar cost averaging is something else and entirely bogus.

Suppose you get $120K. DCA advocates would tell you to invest, say, $10K of it every month into your preferred asset allocation, rather than investing it all at once.

On the other hand, suppose your cat walks over your keyboard while you're logged into your brokerage and sells $120K of stock. Do you invest it $10K at a time or do you just reverse your transaction immediately? Hopefully it is obvious that you do the latter -- but this scenario is exactly equivalent to the first one.

Re:Trading term

[unitron]

I believe the actual term for someone who uses Twitter rumors for stock trading is "twit".

I was thinking the term might be something more technical sounding, like "self-inflicted insolvency".

Re: Trading term

[khallow]

Not sure if it was clearly stated, but High Frequency Trading algorithms should take most of the blame. Computers ran by investment firms monitor social media and invest accordingly, so you don't have to actually watch the ticker with your finger on the button.

That's not HFT. For example, those groups could still do that even with five minute trading intervals as some have suggested here as a supposed "cure" for HFT. HFT would just mean that they could do it on the time scale of milliseconds.

Re: Trading term

[tompaulco]

Not the 401k and IRA funds that I invest in. Mine are mostly either in smallcaps and index tracking stocks. They tend to buy and hold.
I used to be in the Futures market. Sure you could make a little bit more constantly buying and selling, but the transaction costs and hassle made it barely worthwhile. For a lot less stress and barely less money, you could just buy and hold and adjust your portfolio once every few months.

Re:Trading term

[Anonymous Coward]

I believe the actual term for wallstreeters who use twitter rumours for stock trading is "twat".

Re:Trading term

[steelfood]

Dow, adjusted for inflation.

If you'll look at the big chart at the link, you'll notice that the people who bought in at the height of the stock market in the 1920's didn't make their money back until 1960. And then actually went back into the red during the most recent crash.

You can argue if the DJIA is an accurate representation of market as a whole, or of the specific stocks in your portfolio. But you can't argue that even without factoring the capital gains tax, you're probably going to lose. With the capital gains tax, you can't win.

Re:Trading term

[coolsnowmen]

"Adjusting for inflation", sure, but you have to compare that to my savings account adjusted for inflation always seems to go down.

It just because...

[hermitdev]

Brian Hunter hadn't been born yet, and didn't know his history.

Re:It just because...

[Anonymous Coward]

Read the tweet. It didn't say the Soviet Union was involved in the attack. It only discussed "Soviet weapons," which are still very relevant in the eyes of the alarmist doomsday crowd.

Sorry

[Anonymous Coward]

$1 changes are.more than usual. No indication the tweet was causative.

It's not a human failure, its an algorithm failure

[Anonymous Coward]

probably what happened is their algorithm (high frequency trading) read the tweet wrong and bought it without human oversight. a tweet like that would cause some ai to buy since war = higher oil cost.

lovely

[Anonymous Coward]

Lovely to know that such a valuable item such as oil can have its price affected so heavily by something as simple as misreading a tweet.

Traders are stupid?

[gweihir]

The real question is however how we, as a society, place so much power in the hands of stupid people. Politicians, obviously, are another case, but so are apparently nuclear commanders....

Re: Traders are stupid?

[Anonymous Coward]

I rarely buy shares... But if these short term traders make money most of the time, are they really idiots?

Re:Traders are stupid?

[WillAffleckUW]

I think you're confusing the following:

1. Investors - which is most of everything

2. Traders - people and their agents who trade

3. Robot programs which trade based on twitter and facebook and newsfeed key words

4. Derivatives - which is a fancy word for Legalized Gambling

While they can overlap, they are not the exact same groups. Most investors know that active management is more risky and tends to be less profitable to actual investors than index trading, precisely for that reason.

Re: Traders are stupid?

[Anonymous Coward]

No, because of course anyone who makes a profit is smart, and the more profit you make the smarter you are. That's why Donald Trump is held up as such a pillar of genius.

Re:Traders are stupid?

[MightyMartian]

At least we can kick politicians out. We have no control over the fucktards in the stock market, and they probably have more influence over our economic wellbeing. What kind of sane economic system would let sociopaths and simpering morons even near the levers of economic power?

Re:Traders are stupid?

[khallow]

We have no control over the fucktards in the stock market

Sure, we do. Stop giving them money. If they really are losing money, then the problems will stop when they run out and can't trade anymore.

The markets have automatic correcting mechanisms for stupidity. Let's use them.

Re:Traders are stupid?

[DCFusor]

I'm a pro trader - but only with my own dough. It was the machines reading headlines. The guys who program the algos are ignorant, and wouldn't have passed my college DSP course. In fact, they mostly have physics degrees, but couldn't get a "real job", and semantics and stuff like that would be way past them anyway. Real debacles like Knight trading accidently deploying their market trading test horse rather than their real algos - now there's a huge chance for humans with a lick of sense to make real money - they bought high and sold low for 45 or so minutes, losing about half a billion, and I got about $3k of that myself. The NYSE didn't bust the trades as Knight had just pissed all over them about the mangled FB IPO.... Nanex documented this trade by trade, as did a few others, and I copied some to my site under "trading markets" back when it happened. Nice day for humans...not so nice for Knight, out of business now. Had it been Goldman Sachs (and it has been, recently) - the exchanges would have "busted" the trades so Goldman didn't lose a dime (and that's what happened just the other day over a similar amount of money). It's not only crooks out there - it's politics too(!).

why are these nervous nellies ...

[Anonymous Coward]

allowed to rule the world? I think we could do much better with gardeners, instead.

Shocked!

[The_Star_Child]

I am shocked, shocked!

#idiots

[quonsar]

lightning: electrical discharges in the atmosphere.
lightening: what happens just before dawn.

Soviet Weapons (not Soviet Union)

[Anonymous Coward]

"... the Soviet Union is no more .."

The tweet mentioned "Soviet Weapons" which are still around, not the "Soviet Union". Don't tweet words into their mouth.

I even bet oil traders have even looked at the entire #hashtag before screaming down the wire... #fearrules

Re:Soviet Weapons (not Soviet Union)

[styrotech]

Not just putting words in mouths but also completely reversing stuff. The slashdot summary said:

But the tweet referenced the bombing of Syrian airports by Soviets

when the actual tweet said:

Israel Air Force bombards airports in Syria to prevent Soviet weapons reaching the Syrian Army

Which is a completely different thing. There I was thinking "I never knew the Soviets bombed anything in that war" and "why the hell would they be bombing the Syrians?".

spike?

[Anonymous Coward]

A lousy one percent is a "spike" in prices?

Robots make bad decisions

[WillAffleckUW]

They don't realize when something is ridiculous

And that is why having a worldwide integrated financial system mostly cobbled together with automated scripts is not always such a great idea.

"someone farted wrong"

[themushroom]

has become "someone tweeted wrong".

ONE percent!!

[Anonymous Coward]

Wooooooow a 1% gain and this is a very rare thing! I mean who cares if any other stock in the market jumps 2-6% on average everyday... No friends THIS 1% here is what made me a millionaire overnight!!

Wow less than 1%

[nedlohs]

what a massive "jump"!

I personally affect the natural gas market

[Anonymous Coward]

Whenever I go to Taco Bell, natural gas futures drop at least a few cents.

Uhm....wasn't the Syrian airport bombed by Israel?

[Anonymous Coward]

The post says it was the Soviets who bombed the airport, but it was the Israeli's, ostensibly to keep Soviet supplies from reaching Syria.

Animal House homage:

[Hartree]

Bluto: "Did the Syrians give up when the Germans bombed the Bar Lev line? Hell no!"

"Forget it. He's rolling."

Is the price of oil rising...

[Anonymous Coward]

Just a sec, let me wet my finger and lift it into the air...

Yep, I feel a coolness! Raise the price, immediately!

The State of Israel

[__aasehi2499]

Causing problems yesterday, today and tomorrow.

Wow just wow

[globalist]

This is just terrible reporting. 1) No support is given to the claim that it was really the tweet that caused the "spike"*. 2) No account is given on how exactly the supposed misinterpretation came to be. Sorry Reuters, but writing that "traders did it" just isn't good enough. If this is a real "trading" story, there must be an official account of it happening somewhere (like an Exchange memo or something), and if there is, you should fucking dig for it and show us. *3) No context is given explaining why a mere 1% increase in price should even be called a "spike" in oil trading.

law of trading physics

[slashmydots]

There's how smart investment day traders think they are and then there's how smart they really are.

"Lightening"

[Anonymous Coward]

lightening fast

That should be "lightning fast". Nice job of "editing" there, Timothy.

Actually Related to Debt Ceiling Increase

[Azaril]

I'm not sure where this came from. Speaking as an oil trader, the spike was entirely the result of Boehner's speech offering a temporary debt increase. I do have several twitter feeds open to guage news sentiment, but the IDF's isnt one of them. Did the Israelis find a ton of oil i was otherwise unaware of?

Re:Actually Related to Debt Ceiling Increase

[Anonymous Coward]

If the did, they probably stole it from Palestine or some other nearby country.

I guess I'm an old guy ...

[cascadingstylesheet]

... I'm still shocked when anybody does anything based on something that happens on Twitter.

reading comprehension fail

[Anonymous Coward]

and a huge history fail on top of that,
why would the soviets possibly bomb their arab allies?

good example

[SuperDre]

And this is yet another good example of how fubarred the stockmarket is today. it's really time to reform the tradingmarket so stuff like this can't happen.. the whole financial crisis is more due to the media and it's reporting than on real financial information...

Jumped? Soared?

[wonkey_monkey]

the global price of oil jumped more than $1, from $110.40 to $111.50 as trading volumes soared

I'm pretty ignorant about the global oil market. Does 1% really qualify as a jump?

slight confusion about who bobmed whom

[Anonymous Coward]

"referenced the bombing of Syrian airports by Soviets"

Israel bombed Syrian airports, not Soviets.