Data Raise Questions On Role of Speculators

Data Raise Questions On Role of Speculators
BY ANN DAVIS
Word Count: 868 | Companies Featured in This Article: SemGroup
Data emerging on players in the commodities markets show that speculators are a larger piece of the oil market than previously known, a development enlivening an already tense election-year debate about traders' influence.
Last month, the main U.S. regulator of commodities trading, the Commodity Futures Trading Commission, reclassified a large unidentified oil trader as a "noncommercial" speculator.
The move changed many analysts' perceptions of the oil market from a more diversified marketplace to one with a heavier-than-thought concentration of financial players who punt on big bets.

(entire article by subscription only)

http://online.wsj.com/article/SB121875013286742245.html?mod=hps_us_whats_news



http://www.nakedcapitalism.com/2008/08/quelle-surprise-speculators-may-have.html
(entire article available)
FRIDAY, AUGUST 15, 2008
Quelle Surprise! Speculators May Have Had Something to do With Oil Price Runup

Since roughly February, a solid minority of commentarors, including this blogger, have questioned the thesis that the rapid increase in oil prices was solely the function of supply and demand. It was disconcerting to see what reactions this stance elicited. There was often an unwillingness to read what was written, and instead turn the post into an exercise in projection. Use of the word "speculator" is taken to mean the author 1. thinks speculation is bad (no, depends on circumstances), 2. is economically illiterate and 3. is a Peak Oil denier (a lot of vitriol here).....
insert:
From the Wall Street Journal:
Last month, the main U.S. regulator of commodities trading, the Commodity Futures Trading Commission, reclassified a large unidentified oil trader as a "noncommercial" speculator....
As a result, the number of futures and options contracts held by traders counted as speculators..... rose to 49% of all crude-oil bets outstanding on the New York Mercantile Exchange, up from 38%....

Four Democratic senators on Thursday called for an internal CFTC inspector-general investigation into the timing of a July 22 release of a report led by the agency. That report concluded speculators weren't "systematically" driving oil prices. Oil prices soared until mid-July before beginning a decline.

A letter by the senators asks why the report was released before full reviews could take place of trader information the agency only asked for this summer. Also at issue is whether the report played down speculators' influence, notwithstanding the report's finding that "the positions of non-commercial traders in general, and hedge funds in particular, often move in the same direction as prices."....

Meanwhile, a debate is erupting within the agency..... about what the agency does and does not know about participants in this market. .....

Lehman Brothers analysts say the CFTC data, as they are now reported, fail to distinguish certain categories of financial traders from commercial traders and create "an opportunity for the activity of less-informed, purely financial investors to distort expectations."

In recent months, legislators in Congress have demanded insight....In response, the CFTC has been collecting more data. It has pledged to report back to Congress by Sept. 15....

The CFTC is a few weeks into sorting a massive amount of data requested in June from Wall Street firms, and it is requesting additional data.