It’s Tuesday, which means it must be time once again for what has become practically a weekly occurrence: a Senate hearing on speculation in the energy markets. Commodities Futures Trading Commission (CFTC) Acting Chairman Walt Lukken testified before the Senate Committee on Agriculture, Nutrition and Forestry, saying basically that the CFTC needed to further investigate these problems and that the agency required increased funding and staffing to do so. It’s a bit of a switch from his previous testimony stating that supply and demand factors were at fault for the increase in commodity prices. Today, the CFTC announced modifications to its Foreign Board of Trade process and amended its “no-action relief letter” under which ICE Futures Europe is permitted direct access to U.S. customers.
The amended letter conditions direct access on ICE Futures Europe’s adoption of equivalent U.S. position limits and accountability levels on its West Texas Intermediary (WTI) crude oil contract. Lukken said the no-action letters should “ensure proper controls are in place” and added, “During these turbulent market conditions for crude oil, the environment is ripe for those wanting to illegally manipulate the markets and as a result, the Commission has stepped up its already agressive enforcement presence.” ICE Futures Europe released a statement saying it will comply with the amended no-action letter.
Last week, Sen. Dick Durbin (D-IL) introduced a bill asking for increased funding for the CFTC and other provisions designed to improve transparency in the market. The CFTC and Lukken in particular have come under a lot of heat from Congress in the past month for not doing enough to regulate commodity markets, but Sen. Saxby Chambliss (R-GA) said that “it’s irrational that some in Congress have gone so far as to blame [Lukken] for $4 oil prices. Blaming speculators won’t yield lower oil prices. Simply blaming foreign boards of trade and the CFTC is irresponsible.” He said more research is required and more hearings are necessary. Stay tuned.
