The growing lack of transparency in the global oil market is a "troubling trend" that could be contributing to price volatility, a top U.S. commodities regulator will tell an audience Friday.
Scott O'Malia, one of two Republican commissioners at the U.S. Commodity Futures Trading Commission, raised concerns about a lack of oil data from developing countries like China and Russia
The growing lack of transparency in the global oil market is a
"troubling trend" that could be contributing to price volatility, a
top
U.S.
commodities regulator will tell an audience Friday.
Scott O'Malia, one of two Republican commissioners at the U.S. Commodity
Futures Trading Commission, raised concerns about a lack of oil data from
developing countries like
China
and
Russia
during an energy summit being hosted in
Tokyo
by
the International Energy Agency.
"It's imperative that oil markets have accurate and timely data regarding
tightening in market conditions if we hope to avoid the future price spikes
that will undermine our economic growth," O'Malia said in prepared remarks
slated to be delivered Friday afternoon.
The IEA publishes monthly oil production-and-demand figures, but some data out
of
Saudi Arabia
and
other large producers, as well as
China
, the
second-biggest oil consumer after the
U.S.
, is
considered suspect by many market participants. The
U.S.
is
one of the few countries to publish public, weekly data on oil demand.
"Publishing data regarding oil in-transit will reduce the uncertainty of
what is being stored at sea--or withheld from the market," O'Malia said.
"With the shift in oil demand, nations must be committed to expand
International Energy Agency membership or create another data collection entity
that has the confidence of developing nations."
The CFTC doesn't have authority to police physical markets and it's not the
agency in charge of releasing supply-and-demand data, but the CFTC can get
involved in situations where manipulation in a physical market may have an
adverse impact on the futures markets.
The agency is currently in the process of determining if it should impose new
trading limits on energy speculators who bet on the direction of futures market
prices. The move follows accusations of lax oversight by the CFTC over
commodities markets in 2008. Critics blamed speculators, including banks and
institutional investors like pension funds, for record-high oil prices that
year and accused the CFTC of sitting idle while consumers were being gouged at
the pump.
O'Malia didn't discuss his views on the CFTC's own current efforts to impose
greater regulations on the energy market through stricter speculative position
limits, although in the past he has questioned their effectiveness and
suggested they could cause traders to migrate into less regulated
over-the-counter markets.
CFTC Chairman Gary Gensler has been asking Congress to expand the agency's
authority over the over-the-counter markets as part of the broader financial
overhaul.
A version of the legislation which would give the CFTC the power to impose
position limits on swaps passed the U.S. House last year, and the Senate is
gearing up to unveil its own version of a financial bill soon.
O'Malia expressed support for some aspects of the U.S. House bill including
provisions that would beef up risk-management rules and require swaps dealers
and major traders to route swaps through clearinghouses, which guarantee
trades.
He warned, however, that any new rules for derivatives should be consistent
across markets.
"It is critical that this legislation doesn't open new opportunities for
regulatory arbitrage," he said. "It's essential that the new
regulatory authority creates a consistent and seamless regulatory structure
over the $600 trillion global over-the-counter market."
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