MercoPress. South Atlantic News Agency

Greater regulation for “speculation” in US and UK oil futures

The United States Commodity Futures Trading Commission and its United Kingdom counterpart reached a deal with ICE Futures Europe to impose regulations on West Texas Intermediate oil contracts that trade on the London-based electronic exchange within 120 days, CFTC chairman told the US Senate.

The move will place more limits on trading of the US benchmark WTI contract on the London exchange, which hosts up to 30% of total volumes. The New York Mercantile Exchange, which the CFTC regulates, has the rest. Members of the US Senate argued the lack of limits on the ICE exchange created what they call the "London loophole" that allows oil traders to evade US-style regulations. The move comes as oil prices notch up record highs, amid fears that speculators are distorting the market. Fuel costs have shot up hitting the global economy. Oil prices slipped on Tuesday from their record highs near 140 US dollars a barrel reached during Monday trade as investors were cautious ahead of plans by Saudi Arabia to increase production in July. US sweet, light crude finished at 134.01, while London Brent settled at 133.72. With oil prices almost 40% higher than they were at the beginning of the year and, increasingly, this surge is being blamed on speculation by large investors, including hedge funds and banking giants. They are being accused of pushing commodity prices way above the level they would trade at to satisfy supply and demand trends. Under the plan announced by CFTC trading of the West Texas Intermediate oil contract on the ICE Futures Europe by October will be subject to stricter limits on individual positions. It is hoped this will prevent the ability of a single entity to move oil prices. Under the agreement, European authorities will also share trading data with their US counterparts to improve transparency and crack down on market manipulation. The new measures come after talks with the UK financial watchdog, the Financial Services Authority, acting head of the CFTC Walter Lukken said in testimony at a Senate hearing committee. "During these turbulent market conditions for crude oil, the environment is ripe for those wanting to illegally manipulate the markets" said Mr. Lukken.