CFTC prepares to limit energy speculation

The US Commodity Futures Trading Commission (CFTC) may limit speculative trading in energy products and other commodities, CFTC chairman Gary Gensler said yesterday.

The CFTC will hold hearings in July and August on the issue. Gensler pointed out that the CFTC sets anti-speculation position limits for agricultural commodities, but not for energy: futures exchanges set limits to prevent market manipulation, but not to "prevent the burdens of excessive speculation".

At present, position limits do not apply to investors using the energy markets for bona fide hedging, but the CFTC might change this to include only users of the physical product rather than investors with a purely financial exposure through other positions.

Gensler said last month the CFTC would be on guard for another speculation-driven energy bubble as the world's economy recovered. The CFTC's energy markets advisory committee was set up in early 2008 after the Commission noticed an "all-time high" of market manipulation, false reporting and trading violations in 2002–2007. In July 2008, a CFTC report found no evidence linking speculation with the oil price spike, but speculators were widely blamed later that year by US authorities.

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