CFTC chairman sees need to restrict oil speculators
The new head of the Commodity Futures Trading Commission today signaled a fresh push to rein-in oil market speculators.
Opening three days of hearings on the issue of whether to limit trading activity in energy futures contracts, CFTC Chairman Gary Gensler said the agency should take the view that "every option must be on the table" to deal with "excessive speculation."
The CFTC, regulator of U.S. futures markets, is reviewing how to limit how many futures contracts can be held, so-called position limits, and if some traders should be allowed to exceed those limits.
He said several questions remain that the CFTC must still answer, including what the position limits should be; who should set them, the CFTC or the exchange; and if exemptions should be allowed for traders to manage purely financial risk, rather than accepting the delivery of the actual commodity.
Several commissioners warned that the CFTC must be cautious. But, at the same time, Commissioner Bart Chilton said the "unprecedented volatility" over the past year had increased the urgency for the CFTC to make changes. "Whatever manner the agency proceeds, 'going slow' is not an option," he said.
The CFTC plans to issue a report next month that will pin much of the blame for oil prices’ wild volatility in 2008 on speculators piling into the market, the Wall Street Journal reported today.
An initial CFTC report last year on the oil price surge and crash had said that basic supply and demand was responsible for the swings in crude. But Gensler, appointed by President Obama in May, didn’t buy that explanation.
Oil rocketed from $96 a barrel at the end of 2007 to a record $145 by early July 2008. The price then crashed as low as $34 by December with the worldwide meltdown in financial markets.
This year oil has rebounded again amid signs that the global recession is easing. Near-term futures were down $1.41 to $66.97 a barrel at about noon PDT today.
-- Tom Petruno
Photo: CFTC Chairman Gary Gensler. Credit: Susan Walsh / Associated Press