Secretary-general of OPEC asked from U.S. regulators to curtail oil trading by hedge funds and speculators who helped make last year the most volatile in crude oil markets.
For one more time OPEC"s leadership remembered speculators. The world economy faces the worst recession of the last 50 years and unemployment globally rising with astonishing rates and at the same time oil prices fall more than $100 per barrel from historical high prices of last summer. Abdalla el-Badri, secretary-general of the Organization of Petroleum Exporting Countries asked from U.S. regulators to curtail oil trading by hedge funds and speculators who helped make last year the most volatile in crude oil markets. Mr. Badri, who will attend this week"s World Economic Forum in Davos, Switzerland, is seeking rules to ?limit the level of speculation? by investors who buy oil without planning to use it. Oil surged 46 percent in the first half of 2008 to a record $147.27 only to plunge by the end of the year, prompting OPEC to make its biggest ever supply cuts.
?OPEC has repeatedly called for the need to reduce the role of excessive speculative activity in the market. Today, it is impossible to know who is actually buying and selling oil futures? said.
While U.S. congressional leaders proposed legislation to curtail speculation as rising oil caused gasoline to reach $4 a gallon last summer, regulators at the Commodity Futures Trading Commission are divided over the role of hedge funds in last year"s surge in prices. A series of OPEC supply cuts failed to boost prices as demand weakened in what may be the worst global recession in the postwar era.
?The move above $90 a barrel was driven by financial flows rather than fundamentals? of supply and demand, said Edward Morse, chief economist at Louis Capital Markets in New York. Selling by speculators ?helped propel the commodities price downturn, but fundamentals have weighed heavily as well.?
Trading volume in New York rose to a record last year. The number of contracts bought and sold averaged almost eight times daily global oil production in 2008, up from three times in 2005, according to Olivier Jakob, managing director of Zug, Switzerland-based PetroMatrix AG, an energy market consultant.
?Even if we look back at 1998 and 1986, we"ve never had this violent a shift at this extreme in terms of prices,? said Daniel Yergin, chairman of Cambridge Energy Research Associates Inc., referring to previous bear markets. Yergin will also be attending the forum in Davos, as will Jeroen van der Veer, chief executive officer of The Hague-based Royal Dutch Shell Plc.