US regulator acts to curb oil speculation

A federal regulator of US oil contract traders has announced steps to restrain the excessive speculation that many experts believe are driving up gasoline prices.  ┬á The Commodities Futures Trading Commission (CFTC), a previously obscure regulatory agency now in the global spotlight, announced the change in oil-trading regulations yesterday. ┬á┬á The measures announced will require buyers of US oil contracts on the London-based Intercontinental Exchange (ICE) to abide by US regulations for the first time. The exchange handles about 30 percent of such contracts.┬á┬á The rising cost of fuel has hit many areas of the economy, with US airlines forecast to report $10 billion in losses this financial year, according to the US industry group Air Transport Association (ATA). ┬á┬á ATA chief James May told a joint US Senate hearing on speculative oil trading that up to 200 US communities could lose airline service as a result of capacity cuts to save money.┬á┬á "This nation's economy is inextricably linked to the viability of its air transportation system. If the airlines continue to spiral downward, so will the economy," he said. ┬á┬á Earlier, Air Canada announced that it would have to shed 2,000 jobs (7.0 percent reduction in its workforce) and ground 7.0 percent of its services to survive the rise in fuel costs.┬á┬á Oil prices are almost 40 percent higher than they were at the beginning of the year, and speculation by large investors, including hedge funds and banks, has been increasingly highlighted as a contributing cause.┬á┬á Speculators are accused of distorting commodity markets by pushing prices above the level they would normally trade at to satisfy supply and demand. ┬á┬á Under the plan announced by the CFTC, trading of the West Texas Intermediate oil contract on the ICE Futures Europe, which hosts up to 30 percent of total trades, will be subject to stricter limits on individual positions by October. It is hoped this will prevent the ability of a single entity to influence oil prices. ┬á┬á European authorities will also have to share trading data with their US counterparts to improve transparency and crack down on market manipulation. The ICE exchange said it would comply with US regulatory requirements subject to approval by the Financial Services Authority. ┬á┬á Meanwhile, in Doha, Qatar, yesterday, officials from the Organization of Petroleum Exporting Countries (OPEC) told journalists that an increase in oil output is not needed as the current level of supply exceeds demandÔÇöa statement that implicates the role of speculators in the high prices.┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *