The Financial Times is reporting on a study done by the Edhec-Risk Institute that finds that speculation in oil futures (NYMEX) does not appear excessive in comparison to commercial hedging needs over the last three and one-half years. For a copy of the study itself, see here.
(Note: Registration required for FT article.)
Britain's Financial Services Authority is poised to find that recent oil market volatility has more to do with uncertainty over economic growth than speculation in the market, according to this article in the WSJ (Note: Subscription required.). That finding is interesting in light of recent statements made by the CFTC regarding potential greater regulation of energy commodity markets.
[Update: In a timely article, the WSJ is reporting that the CFTC is likely to come out with a report next month blaming oil price volatility on speculators. (Subscription required.) And the Houston Chronicle is reporting that the CFTC has imposed new rules on natural gas swaps on ICE (the IntercontinentalExchange) to close the "Enron loop."]
Rising crude oil prices are causing some in Washington to revive calls for greater oversight of futures-contract purchases by those not involved in the physical production or consumption of commodities, according to this CNNMoney report.
From the National Regulatory Research Institute: "Speculation in itself is not a bad thing. Good speculation provides a valuable market function. It helps local gas distribution companies and other large gas consumers, for example, to hedge against rising prices, and so to reduce risk - a significant benefit amid highly volatile gas prices and the current economic situation. By the same token, good speculation provides natural gas producers with more predictable future revenues, allowing them to expand with less uncertainty and borrowing costs. That trend, in turn, should help to lower the price of natural gas in the long run. Any attempt to curtail good speculation, therefore, is likely to make life harder for firms and raise natural gas prices." A copy of the report can be found here (entitled, Speculation in the Natural Gas Market: What It Is and What It Isn’t; When It’s Good and When It’s Bad).
Add this blog to your feeds or put your e-mail in the box below and hit GO to subscribe by e-mail.
Enter keywords: