Instead it’s the Geneva-based oil trading conglomerate Vitol – or so America’s Commodity Futures Trading Commission seems to be insinuating.
The Washington Post on Thursday named Vitol, which has offices in about 25 countries, as a key player in the oil market that had been “reclassified” by the CFTC as a financial – rather than industrial – operator.
Earlier this month it emerged that after collating fresh market data the American regulator had decided that many of those active in the market were trying to make money from price moves, rather than simply managing energy supplies. The Post now says the CFTC believes some 81 per cent of the oil contracts on Nymex lie in the hands of “financial firms speculating for their clients or for themselves…”
Vitol alone is said to have spoken for 11 per cent of all Nymex contracts at one point in July.
Hysterical congressmen are now expected to pick up the theme when they return to work after Labor Day. As John Kemp of RBS Sempra Metals says in a note to clients:
Congressional patience has now run out — and the CFTC’s previous position (which might be summarised as investment inflows have no appreciable impact on price formation) has become unsustainable in political terms.
The question is not whether the position will change but when and by how much. The key juncture will come on or before Sep 15, when the CFTC has promised to provide an updated report on speculation, market participation and price formation to the Congress. The Interim Report of the Inter-Agency Taskforce on Commodity Markets largely attributed the recent surge in oil prices to supply-demand fundamentals, and a weaker USD, while saying there was no evidence that speculation or the influx of investment money had any significant impact on prices. It noted, among other things, speculators had not increased their share of NYMEX contracts over the last several years. But that was before the CFTC reclassified one large trader and began to look at the classification of others.
The CFTC now has to decide whether to confirm that conclusion in its final report, or modify it to mollify increasingly sceptical and hostile legislators. Rep John Dingell (D-Mich)’s Committee on Energy and Commerce in the House of Representatives has already asked for a full list of all the swap exemptions and other exemptions granted by NYMEX and the CFTC over the last few years and will almost certainly take up the issue again when House returns after Labor Day.
The issue is about to come to a head in the next three weeks.
Related links:
Police called in to investigate oil price rise – FT Alphaville
Vitol’s website
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