CFTC mulls limits on holdings of energy market speculators

07 July 2009 16:32  [Source: ICIS news]

LONDON (ICIS news)--The Commodity Futures Trading Commission (CFTC) is considering the introduction of limits on the holdings of energy futures traders to stem the market effects of price speculation, the US regulator announced on Tuesday.

The CFTC will hold a series of hearings throughout July and August to determine the need for government-imposed restrictions in oil, gas and other energy markets.

“My firm belief is that we must aggressively use all existing authorities to ensure market integrity,” said CFTC chairman Gary Gensler.

“The Commodity Exchange Act states that the CFTC shall impose limits on trading and positions as necessary to eliminate the undue burdens on interstate commerce that may result from excessive speculation.

“Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities,” he added.

The tougher stance follows an announcement from the UK’s Financial Services Authority (FSA) on 6 July threatening the imposition of fines that treble in size from current levels for breaches of conduct.

In 2008, many market sources attributed the massive spike in crude oil prices that led to the record $147/bbl in July to the involvement of speculators.

Recently, futures prices hit this year’s peak of $73/bbl. This particular spike, on 30 June, was reportedly caused by a rogue trader with international brokerage firm PVM Oil Futures.

Crude oil prices had been steadily increasing from $44/bbl at the start of 2009 despite the findings of numerous market reports pointing to falling global demand for the product.

August Brent futures were trading at $63.13/bbl on Tuesday afternoon.

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By: Alex Davis
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