Oil speculators’ role unclear, report finds

A federal regulatory agency said Thursday that it could not determine after a lengthy review how much speculators have influenced commodity prices, especially the run-up this year in oil prices.

The Commodity Futures Trading Commission released a much-anticipated report examining the activities of large index investors and “swap” traders -- those who trade on behalf of banks or wealthy individuals -- in the commodity futures markets, including crude oil.

“This preliminary survey is not able to accurately answer and quantify the amount of speculative trading occurring in the futures markets,” the report said. The problem is that the available data do not differentiate between speculative and legitimate hedge trading activities, it said.

The commission staff report recommended better classification of trading activities and improved market reporting requirements for large traders.

The commission said it might also reclassify swap dealers under a separate category in its weekly reports to keep better track of potentially speculative trading activities.

Critics have blamed record crude prices on speculators, who, unlike airlines and other industries that hedge fuel costs to protect against price hikes, have no implicit link to oil.

This week several senators who want Congress to impose new measures to control oil market speculation released a private consultant’s report maintaining that speculation by large investors was a primary reason for the jump in oil prices.

The report said those investors poured $60 billion into oil market futures during the first five months of the year and since July have withdrawn $39 billion as oil prices declined.

But the trading commission staff report produced other data that suggest that speculation may not have had such a dramatic effect.

Although oil prices rose significantly in the first six months of 2008, “the activity of commodity index trades during this period reflected a net decline of swap contracts as measured in standardized futures equivalents,” the report said.

Also, commodity index traders’ “long” positions -- ones that anticipated that prices would continue to rise -- decreased by 45,000 contracts, or about 11%, on the New York Mercantile Exchange during the first six months of the year, the report said.

And during the period, the net nominal commodity index investment in oil futures rose in value about 30% to $51 billion from $39 billion, the report said, but this “appears to have resulted entirely from the increase in the price of oil,” which jumped 46% to $140 a barrel from $96.