UPDATE 1-US lawmakers want to close London ICE oil loophole

(Adds background on WTI trade in paragraph 3)

By Ayesha Rascoe

WASHINGTON, July 8 (Reuters) - The Commodity Futures Trading Commission should repeal a measure exempting the IntercontinentalExchange's (ICE.N) London exchange, where West Texas Intermediate crude oil trades, from most U.S. regulation, lawmakers said on Wednesday.

Senators Maria Cantwell and Olympia Snowe said in a letter that the top U.S. futures market regulator must do more to increase transparency and oversight on foreign exchanges where U.S. oil contracts are traded.

The senators said they want ICE to justify why electronic trading of WTI oil contracts on its London exchange should not be subject to the same scrutiny as other U.S. futures transactions. While U.S. benchmark crude WTI is traded on ICE, the volumes are relatively small compared with trade on the New York Mercantile Exchange (CME.O).

Lawmakers have complained repeatedly that the lack of oversight on the ICE exchange has created a "London loophole" that allows oil traders to dodge U.S. regulations causing volatile oil price swings.

Facing intense pressure from Congress as oil prices skyrocketed to levels above $147 a barrel last summer, the CFTC and its British counterpart reached a deal with ICE to place more limits on trading of the U.S. benchmark WTI contract on the London exchange.

In their letter, the lawmakers said these actions were a step in the right direction, but they are not enough.

Oil prices more than doubled from below $33 a barrel last December to more than $70 a barrel last month, before easing recently to around $60 on concerns about the flagging economy.