Oil data cast little light on speculation

The Commodity Futures Trading Commission now tallies data on oil trading in two continents, but the expanded reports still reveal little about the role of speculators in setting prices.

The agency recently began including oil-trading data from ICE Futures Europe's West Texas Intermediate contract in addition to the New York Mercantile Exchange in its weekly reports outlining the activities of large traders in commodity markets. The reports break out the open bets that commodities such as oil and wheat will rise or fall by speculators as well as companies trading to reduce business risk.

CFTC Chairman Gary Gensler in late July said the inclusion of ICE data is a move to "begin fulfilling our commitment to greater transparency."

Critics said the regulator is providing more of the same flawed data, dividing traders into frustratingly vague "commercial" and "noncommercial" columns.

"I always viewed it as a match in a cave," said Craig Pirrong, director of the Global Energy Management Institute at the University of Houston. "It sheds a little light, but not a whole lot."

The CFTC also plans to break swap dealers out of the commercial category and into their own group, while doing the same for hedge funds in the noncommercial section. Supporters said these moves will increase market transparency. Right now, the CFTC divides "commercial" traders, who use the market to reduce the risk that price swings pose to their regular business, from "noncommercials," which are financial investors like hedge funds.

A major fuel consumer like an airline would be considered a commercial trader. But so would the airline's swap dealer, often a bank, which helps the carrier use the oil market to stabilize jet-fuel costs, even though the dealer might also have a desk devoted to speculative trading. Some oil companies also have feet in both worlds, using knowledge gained from owning physical assets to place bets on the direction prices will take.

As some of the only hard data available about speculators' activities, the reports are frequently cited both by those looking to rein in financial investors as well as by their defenders.

In a series of hearings that ended Wednesday, Mr. Gensler made clear that the CFTC is preparing to set new position limits on speculation in energy markets, while Congress is considering granting regulators more oversight over commodities trading.

Some see changes in the reports going too far. "Why should the CFTC provide information to others to enhance their ability to speculate?" asked Sharon Brown-Hruska, a former acting CFTC chairwoman who now works as an economist at National Economic Research Associates. She said a further breakdown of the data could create "speculative opportunism" by making it easy to identify swap dealers' positions.