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Friday, August 15, 2008

Oil and Futures Speculation Redux

For those new to EconomPic Data (most of you), let me bring you back to a post from June, Do Oil Futures Impact the Cash Price? YES!!! I walked through (at a high level) how the impact occurs. For additional detail, click the above link.

Now some additional proof that Naked Capitalism points to 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."