CFTC report on oil speculation

The Oct NYMEX crude oil contract closed lower at $100.87, less than a dollar from the low at $100.10, despite the availability of the news yesterday that Hurricane Ike is category 2 and will hit Houston this weekend. It rose 94 cents to $101.81 in Singapore. About 26% of US oil production is in the Gulf, and Bloomberg reports that the Minerals Management Service said yesterday evacuations have halted 97% of Gulf crude output and 93% of natural gas production. As of 11:17 am GMT, oil is up to $102.26, or over $2 from the low yesterday, but even so, this is a muted response to a potential disaster. If we were still in full Katrina mode, oil would have risen by a lot more than $2. Something is clearly going on. Insiders call it “demand destruction” but whose demand? We wonder if it’s not speculators fearful of regulators, or rather Congress.

They have little to fear from the bumbling regulators. The WSJ reports that the CFTC report on oil speculation, especially by index managers, is inconclusive. The CFTC panel got data from 32 swap-dealer entities and examined millions of transactions worth billions of dollars over a six-month period from Dec. 31 to June 30. And they couldn’t figure out what they were looking at. It’s not clear they got any of the numbers right, saying it found “$200 billion in total investment in commodity index investments, whereas independent estimates by Wall Street firms and other researchers are significantly closer to $300 billion.” The panel admits the data in inadequate.

Gee.

Bye for Now

Barbara Rockefeller