Financial Regulatory Forum

EU joins U.S. call for more oil market transparency

September 16, 2009

By Jan Strupczewski and Pete Harrison
BRUSSELS, Sept 16 (Reuters) – The European Union has joined the United States in calling for action to improve transparency in oil markets, a draft EU document shows.

The United States is expected to call on the Group of 20 nations to increase oil market transparency when the group meets on Sept. 24-25 for a summit in Pittsburgh, Pennsylvania.

“The G20 should commit to improving energy security by increasing oil market transparency and contain speculation,” said a draft document for EU leaders who will meet on Thursday to prepare for the Pittsburgh meeting.

Such action would include “reporting comprehensive data on domestic oil markets and taking steps to oversee the over-the–counter markets so that regulators have a more complete view into the actions of market participants,” said the draft obtained by Reuters.

Transparency and speculative activity have become an issue in commodity markets following the six-year record run that sent oil to all-time highs near $150 a barrel last year, battering the economies of import-reliant nations.

In addition, food prices rose sharply last year as investors bought contracts in wheat, corn and soybean futures.

The United States has already taken steps to improve its domestic data collection quality and increase the information provided by speculators in weekly trader commitment reports released by the Commodity Futures Trading Commission (CFTC).

The CFTC and the UK Financial Services Authority (FSA) have also agreed they would work together to audit more closely and allow mutual on-site visits of exchange operators, to gain a better view of trading in U.S. oil futures on London’s IntercontinentalExchange.

But the ICE and the London Metal Exchange, both FSA-regulated, have said they have no plans to change the way they regulate large positions.

A source familiar with the proposal told Reuters earlier this month the United States planned to call on the G20 for tighter monitoring of over-the-counter markets in member nations, similar to steps taken in the U.S.

It also said G20 members should provide more timely and accurate information on the notoriously murky oil market, including on inventory levels and positions held in the futures markets.

The EU draft made no mention of position sizes.

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