Lawmaker quizzes regulators on oil speculators

By Chris Baltimore

WASHINGTON (Reuters) - A leading U.S. senator on Tuesday pressed the top futures market regulator for more information about speculation by big investment funds in crude oil futures and other energy markets.

U.S. Sen. Jeff Bingaman, chairman of the U.S. Senate Energy Committee, said Commodity Futures Trading Commission (CFTC) officials provided "glaringly incomplete" data to back up testimony that speculative trading is not the chief reason behind crude oil's rise above $135 a barrel.

CFTC experts testified that market forces are primarily responsible for the rising price of oil, although investors may be profiting from the trend.

Bingaman, a New Mexico Democrat, sent acting CFTC chairman Walter Lukken a letter asking why the agency classifies large investment banks and other swap dealers as commercial traders -- the same category it uses for more traditional investors in the physical oil market such as oil companies and airlines.

"The practice of including investment banks in the commercial participant category calls into question the CFTC's continued assertion that non-commercial participants, or speculators, follow rather than lead oil price movements," Bingaman wrote in the letter.

Bingaman also said a recent trend of institutional investors buying petroleum storage capacity has led to "concerns regarding potential market manipulation strategies," and asked the CFTC about how it tracks such trading activity.

Oil prices have doubled in the past year as big funds have poured money into commodities, seeking a hedge against inflation and the weaker dollar. The hot money has helped extend a six-year rally in oil, as supplies have failed to keep pace with surging demand in emerging economies like China.

Bingaman sent a wide-ranging questionnaire to Lukken, seeking a response by June 10, Bingaman also asked detailed questions about increased over-the-counter trading in U.S. oil futures contracts on foreign boards of trade.