Debate on oil speculators hits new pitch
By Chris Flood
July 25 2008
Oil prices continued their correction this week as the debate about the influence of speculators in energy markets reached a new pitch.
The US Senate yesterday failed to agree on proposals to limit excessive speculation in energy markets and, with oil prices becoming a huge political issue in a presidential election year, attention turns to the House of Representatives, which will debate the issue next week.
But with US lawmakers about to break for summer holidays, any change to regulations governing oil trading appears unlikely before September at the earliest.
[WHICH SENATORS failed to agree on proposals? Which ones. I want to know. Then I want to know why. And if any of them are Republican - they need to lose in November. if any are Democrat - they need to be publicly humiliated and then fired. ]
Nymex September West Texas Intermediate sank $2.99 to a session low of $122.50 a barrel on Friday, down 5 per cent this week.
ICE September Brent lost $3.05 to a session low of $123.39 a barrel on Friday, off 5.9 per cent this week. Hurricane Dolly caused minimal disruption to production in the Gulf of Mexico and the ending of that threat contributed to selling pressure this week.
The correction for oil prices has lasted two weeks with Brent down 16.3 per cent since hitting a record $147.50 on July 11 while WTI has sunk 16.8 per cent since reaching an all-time high of $147.27 on the same day.
“We would still see any price below $120 as representing a fairly strong buy signal,” said analysts at Barclays Capital. “Crude oil stocks remain low globally while the projected path of incremental demand and supply suggests virtually no inventory build over the course of the current quarter.”
US natural gas prices also fell sharply this week with Nymex September Henry Hub down 12.4 per cent to $9.262 per million British thermal units. US coal prices have fallen, providing an attractively priced alternative to natural gas to some US power plant operators.
The correction in oil prices has weighed heavily across agricultural commodities, base metals and gold. Renewed fears about the health of the global financial system and the outlook for economic growth has prompted many hedge funds and short-term momentum players to cut back on their commodities exposures.