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RE: June Update – Speculators Largest buyers Oil

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#6761

Charles Randall
Participant

<Everyone seems to be coming to conclusion speculators are major cause for Crude price increases…..except CFTC. But outside submitting bills & proposals Congress nor Wallstreet still hasn’t acted on news – CER>
 
Speculators Are Largest U.S. Oil Contract Buyers (Update June)
2008-06-23 11:57 (New York)

By Tina Seeley
     June 23 (Bloomberg) — Speculators became the largest
players in oil futures markets, nearly doubling their share in
the past eight years as prices rose to records, in a “radical
shift” for the market, according to a congressional committee
.
     In January 2000, speculators controlled 37 percent of
contracts to buy West Texas Intermediate crude oil on the New
York Mercantile Exchange,
with the rest held by physical
hedgers, including refiners and airlines that need to hedge
against delivered fuel costs.
     By this April, speculators controlled 71 percent of the
contracts, according to data provided to the House Energy and
Commerce Committee by the Commodity Futures Trading Commission
.
     “Energy speculation has become a growth industry and it is
time for the government to intervene,” Representative John
Dingell, the committee chairman, said at a subcommittee hearing
today.
     The hearing by the Subcommittee on Oversight and
Investigations focuses on speculation in energy markets,
including testimony from Walter Lukken, acting chairman of the
CFTC; and Doug Steenland,
chief executive officer of Northwest
Airlines.
     “The CFTC data illustrates a radical shift in the oil
futures market from one used mainly by buyers and sellers to
hedge price risk to one where most of the participants are
speculators,” according to a memorandum prepared by committee
staff.

                        Record Prices

    Crude oil prices have doubled from last year, reaching a
record $139.89
a barrel in trading on the New York Mercantile
Exchange June 16. Congress has held several hearings on what is
driving prices up, and President George W. Bush last week called
for expanded drilling to respond to record prices.
     Dingell, a Michigan Democrat, said Congress should explore
“a full range of options” to limit speculation, including
raising margin requirements for financial speculators to 50
percent, preventing pension funds from investing in commodities

and prohibiting investment banks from owning energy assets.
     “These and other ideas need to be debated, evaluated, and
acted on sooner rather than later,” Dingell said.
     Representative Bart Stupak, chairman of the investigations
subcommittee, said June 20 that speculation was adding $65 to
$70 to the cost of a barrel of oil. Stupak
, a Michigan Democrat,
has introduced one of several pieces of legislation that aim to
limit speculation in oil markets or heighten oversight of the
markets by the commission.

                         `Driving Force’

     “The Commodity Futures Trading Commission and the
Department of Energy may be the only people in the world who
currently believe that speculation
in energy markets is not a
driving force in the recent run up in oil prices
,” Stupak said
in an e-mailed statement.
     Energy Secretary Samuel Bodman said June 21, while
attending a meeting of oil producers and consumers in Saudi
Arabia, there is “no evidence that speculators are driving
prices.”
     Chakib Khelil, president of the Organization of Petroleum
Exporting Countries, said at the meeting that speculators are
driving up prices,
along with the credit crisis and geopolitics.
     The U.S. futures regulator last month announced it had
begun an investigation of oil delivery, storage and trading as
well as requiring more information from market participants
including institutional investors and index traders.
     “Every crisis needs a culprit,” Sanford C. Bernstein
analysts Andrew Keen, Ben Dell, Neil McMahon and Hugh Wynne
wrote in a June 20 note. “Active speculation is a catalyst for
market movements, not an underlying cause.”

–With reporting by Daniel Whitten in Washington. Editor: Dan
Stets, Joe Link

To contact the reporter on this story:
Tina Seeley in Washington at +1-202-624-1965 or
tseeley@bloomberg.net.

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