US regulators should study oil slump: CFTC official
Wednesday, 28 January 2015 00:00
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MIAMI (Reuters): US futures market regulators should review the sharp drop in crude oil prices to gain a better understanding of the slide as they pursue rules to crack down on speculation in commodities, a top official said on Monday.
The Commodity Futures Trading Commission is considering regulations to rein in speculation in energy, grain and metals markets with new rules on position limits. However, the agency needs more data to justify sweeping changes, Commissioner Christopher Giancarlo told a commodities conference in Miami.
A review of oil’s decline could help determine what is driving market moves, he added. Oil prices have fallen almost 60% since June
“Where are those wily excessive speculators?” he asked.
The lack of CFTC data on speculation is an issue “of fundamental significance” to any decision to adopt final regulations on position limits, Giancarlo said. The only CFTC analysis cited in the position limits proposal was generated three decades ago, he noted.
Still, Giancarlo told Reuters he was not calling for the agency to put off consideration of new rules until more data are collected. He said it was “troubling” the agency had not conducted more analyses on its own.
The CFTC has received hundreds of public comments on its position limit proposal. The reform is controversial because critics warn it could hurt industries that rely upon derivatives markets to hedge against commodity risks.
A US judge in 2012 threw out an earlier version of the rule because he said the CFTC did not meet its legal obligation to prove position limits are necessary to diminish or prevent excessive speculation.
US Representative Mike Conaway of Texas said it is unnecessary for CFTC to review the drop in oil. In commodities, there has been a “constant review of speculators and price movements, and no real link toward untoward speculation,” he told Reuters.
“This one is pretty easily understood,” he said about oil’s price drop. “The Saudis opened the spigots, the US has increased its production, demand is down.”
Bryan Durkin, Chief Commercial Officer for CME Group Inc, the world’s largest futures exchange operator, agreed oil’s fall was driven by supply and demand.
“What’s happening in the marketplace is complex and due to market fundamentals,” he said in an interview at the conference.
