CFTC says speculation not to blame for oil price rise

The US Commodity Futures Trading Commission (CFTC) has found no evidence that speculation is responsible for the rise in crude oil prices, despite political pressure to curb the activities of hedge funds and other futures investors blamed for high fuel costs.

In a report published in July, the CFTC said strong world economic growth had outstripped “sluggish” expansion of supply, meaning “very large price increases have occurred as the market balances supply and demand”.

The spectre of speculation has already led the US Congress to press the CFTC to close the so-called London loophole by imposing more restrictions on the trading of oil futures by US customers on ICE Futures Europe, an electronic exchange run out of London by the Atlanta-based IntercontinentalExchange.

But although there has been a dramatic rise in volumes of oil derivatives traded over the past few years, an examination of trading records has shown no evidence that groups of speculators are moving spot prices rather than reacting to them, the CFTC said. Low inventories and geopolitical worries, as well as the difficulty of substituting other energy sources for oil in the short term, had also contributed to the high and volatile crude price, it added.

Tags:  CFTC, oil trading