Impact of curbs on energy market speculation

01-Sep-09
The US Commodity Futures Trading Commission is taking steps to intensify regulations and is cooperating with over a dozen overseas regulators to apply rules on exchanges where commodities trade. Very shortly, the CFTC is expected to impose federal position limits in oil and natural gas markets, that could end exemptions that allow banks, funds and retail investor groups to build large positions unchecked. This group would scale back its position in natural gas contracts to comply with regulation. New, tighter volume limits have a far greater chance of pushing prices sharply to the downside. Curbs on energy market speculation could have an impact on oil prices, with at least one major bank boldly expecting a 30% price plunge. Analysts are not sure how regulation will affect trading volume, or whether lower volumes would affect prices at all. But some believe prices are bound to fall when speculators, or noncommercial traders, get squeezed by the new rules.
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