UPDATE 1-CFTC advisory panel to meet on energy mkt issues

(Adds letter from senators to CFTC)

By Tom Doggett

WASHINGTON, June 9 (Reuters) - As oil and gasoline prices hit record highs, the U.S. Commodity Futures Trading Commission said its new energy market advisory committee will meet on Tuesday to discuss the role of index trading in energy markets and energy trading on foreign boards of trade.

"In these extraordinary times for the commodity markets, the commission is eager to learn from this knowledgeable group, comprised of a cross section of those who use and are affected by the markets, on the important issues of market transparency and index trading" said CFTC Chairman Walter Lukken.

The advisory panel is made up of representatives from the energy industry, including Lehman Brothers LEH.N, Goldman Sachs (GS.N) and Merrill Lynch MER.N, along with New York Mercantile Exchange NME.N President James Newsome and IntercontinentalExchange (ICE.N) President Jeffrey Sprecher.

Government officials from the Energy Department, Federal Energy Regulatory Commission and the Federal Trade Commission have also been invited to observe the panel's discussions.

"The insight the commission will gain from this new committee, and from the agency's own recent initiatives in the energy markets, will better prepare the commission as it continues its critical oversight function of these growing and evolving markets," Lukken said.

The agency announced last month that it began an investigation last December into possible manipulation of the oil market.

The CFTC will host international regulators later this week at a two-day conference to address ways to detect and deter manipulation in energy markets. That meeting will be held behind closed doors, even though the agency has called for more transparency in energy markets.

In a related matter, following the huge jump in crude oil costs and the record price for gasoline, a group of U.S. senators on Monday called on the CFTC to use its emergency powers to prevent institutional investors from increasing their positions in energy futures contracts.

The lawmakers said in a letter to the CFTC's Lukken that the agency should limit exemptions from position limits only to traders who are bona fide hedgers that are trying to limit their risks to price swings of the underlying commodity, and not provide relief from positions limits to speculators who trying to make a profit by betting on prices.

"At a time when American people cannot escape the direct impact that rising gas and oil prices have on their day-to-day lives, it is incumbent that we ensure that our energy futures markets are transparent and demonstrate supply and demand -- not manipulation by large institutional investors," said Republican Sen. Olympia Snowe, one of the lawmakers who wrote to the CFTC. (Editing by Christian Wiessner)