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US cracks down on oil speculators | US cracks down on oil speculators |
(about 2 hours later) | |
US regulators have announced plans to impose limits on oil trades overseas. | US regulators have announced plans to impose limits on oil trades overseas. |
The US Commodity Futures Trading Commission said the London-based electronic exchange would have to comply with US rules. | The US Commodity Futures Trading Commission said the London-based electronic exchange would have to comply with US rules. |
The move comes as oil prices notch up record highs, amid fears that speculators are distorting the market. | The move comes as oil prices notch up record highs, amid fears that speculators are distorting the market. |
As a result, fuel costs have shot up hitting the global economy. Airlines have been hit badly, with near record losses expected for 2008 in the US. | As a result, fuel costs have shot up hitting the global economy. Airlines have been hit badly, with near record losses expected for 2008 in the US. |
US airlines were forecast to report $10bn (£5bn) of losses this financial year as sky-high fuel costs erode profits, according to the industry group Air Transport Association (ATA). | US airlines were forecast to report $10bn (£5bn) of losses this financial year as sky-high fuel costs erode profits, according to the industry group Air Transport Association (ATA). |
Oil prices slipped from their record highs near $140 a barrel reached during Monday trade as investors were cautious ahead of plans by Saudi Arabia to increase production in July. | Oil prices slipped from their record highs near $140 a barrel reached during Monday trade as investors were cautious ahead of plans by Saudi Arabia to increase production in July. |
US sweet, light crude finished down 60 cents at $134.01, while London Brent settled 99 cents lower at $133.72. | US sweet, light crude finished down 60 cents at $134.01, while London Brent settled 99 cents lower at $133.72. |
Speculators to blame? | Speculators to blame? |
But, oil prices are still almost 40% higher than they were at the beginning of the year and, increasingly, this surge is being blamed on speculation by large investors, including hedge funds and banking giants. | But, oil prices are still almost 40% higher than they were at the beginning of the year and, increasingly, this surge is being blamed on speculation by large investors, including hedge funds and banking giants. |
They are being accused of pushing commodity prices way above the level they would trade at to satisfy supply and demand trends. | They are being accused of pushing commodity prices way above the level they would trade at to satisfy supply and demand trends. |
Representing US airlines, the ATA is one group pressing for tighter regulation and increased transparency in the energy markets. | Representing US airlines, the ATA is one group pressing for tighter regulation and increased transparency in the energy markets. |
Its head James May told a joint US Senate hearing on speculative oil trading that up to 200 US communities could lose airline service as a result of capacity cuts to save money. | Its head James May told a joint US Senate hearing on speculative oil trading that up to 200 US communities could lose airline service as a result of capacity cuts to save money. |
"This nation's economy is inextricably linked to the viability of its air transportation system. If the airlines continue to spiral downward, so will the economy," he said. | "This nation's economy is inextricably linked to the viability of its air transportation system. If the airlines continue to spiral downward, so will the economy," he said. |
Earlier, Air Canada announced that it would have to shed 2,000 jobs - a 7% reduction in its workforce - and ground 7% of its services to survive the rising fuel charges. | Earlier, Air Canada announced that it would have to shed 2,000 jobs - a 7% reduction in its workforce - and ground 7% of its services to survive the rising fuel charges. |
More disclosure | More disclosure |
Under the plan announced by the US Commodity Futures Trading Commission (CFTC), trading of the West Texas Intermediate oil contract on the ICE Futures Europe - which hosts up to 30% of total trades - will by October be subject to stricter limits on individual positions. | Under the plan announced by the US Commodity Futures Trading Commission (CFTC), trading of the West Texas Intermediate oil contract on the ICE Futures Europe - which hosts up to 30% of total trades - will by October be subject to stricter limits on individual positions. |
It is hoped this will prevent the ability of a single entity to move oil prices. | It is hoped this will prevent the ability of a single entity to move oil prices. |
Under the measures, European authorities will also share trading data with their US counterparts to improve transparency and crack down on market manipulation. | |
The ICE exchange said it would comply with US regulatory requirements subject to approval by the Financial Services Authority. | |
The acting head of the CFTC Walter Lukken said in testimony at a Senate hearing committee: "During these turbulent market conditions for crude oil, the environment is ripe for those wanting to illegally manipulate the markets," he said. |
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