CFTC speculation reversal: not really a surprise * Update *

It shouldn’t come as a surprise that the Commodity Futures Trading Commission plans to release a report saying speculators had a big role in last year’s oil price run-up (although CFTC chair Gensler just told our own Jennifer Dlouhy that “reports of the report” were inaccurate and that no commissioner had access to the data.)
* Update *
The CFTC put out this statement this afternoon:

“On July 7th, the CFTC announced that we will make improvements to bring greater transparency to the markets. This would include enhancements to our Commitments of Traders reports and releasing an index investor report. I believe that it is inappropriate to speculate on data that the Commission will be releasing in the future – data that none of the Commissioners has seen. News reports that the CFTC will release a study reversing the agency’s position on energy speculation are both premature and inaccurate. The CFTC hearings and data will provide critical insight into the role of excessive speculation in energy price discovery.”

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True, the same agency concluded just last year that speculators were not to blame, that it was market fundamentals.
But that was quickly challenged by some who questioned the quality of the data the CFTC used, and a well-known (but sometimes reviled by the industry) analyst also questioned the conclusion.
And, of course, that was a different administration. Since then the make-up of the commission has changed and so has some of the staff. One addition is Dan Berkovitz as general counsel.
Berkovitz was counsel to the Senate Permanent Subcommittee on Investigations, wading deep into several investigations into energy market speculation, including the ‘London loophole’ in June 2008, and the ‘Enron Loophole’ in the summer of 2007.
As Risk News notes, under Levin, “Berkovitz was also involved in Congress’s decision to pass legislation for regulating electronic trading facilities for energy commodities.”
In other words, he’s been all over this stuff for years. He told a crowd at a University of Houston energy trading conference in 2007 that regulators needed more access to trading information to getting a better handle of their influence.
A year later at another Houston conference he warned that the energy market had entered a “new era” of thinking in which supply/demand dynamics have taking a back seat, according to Platt’s Inside FERC:

“The key question, according to Berkovitz, is how to stop excessive speculation in over-the-counter markets “without stopping beneficial behavior. Is there a way to do this without creating some of the harmful market effect? That’s the debate.”

Judging from some of the comments at the CFTC hearing this morning, it doesn’t seem to be a quesiton of if speculators have an impact but how much and what should be done.
You can watch the hearings live here when it resumes Wednesday and on August 5.

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