Hedge fund transparency key to curb oil spikes: IEA

By Daniel Flynn

L'AQUILA, Italy (Reuters) - More information on hedge funds and greater transparency on who is dealing in commodities futures markets is essential to the G8 aim of reducing oil price volatility, the head of the International Energy Agency said.

IEA Executive Director Nobuo Tanaka also forecast a "very strong rebound" in oil demand in 2010 as global economic growth picks up after this year's crash. The Paris-based agency is due to publish its detailed forecast for next year on Friday.

In a statement on Wednesday, the Group of Eight rich nations called for international institutions, including the IEA, to reduce excessive volatility in oil price. Crude futures hit a record level of $147 a barrel last year before tumbling below $40 months later due to the international financial crisis.

"Transparency in the futures market is certainly the issue: who is trading, is it a commercial trade or a non-commercial trade. We need more transparency," Tanaka told Reuters in an interview on the sidelines of an expanded G8 summit in Italy.

"But we think still that (market) fundamentals are more important to determine the direction of the oil price: speculation is amplifying the movement upwards or downwards but not necessarily determining the price of oil," Tanaka said.

He warned that oil markets could be "really tight" by 2014-2015 unless there was an increase in production and exploration investment. He compared the scenario to last year's market, when oil prices spiked to $147 a barrel.

NO PRICE FIXING

Tanaka said the need for accurate oil market data was another major element for improving transparency in the markets.

"We do not have good data, especially in emerging economies, so we cannot define what is happening: are they buying more oil to build their stocks or is it for consumption?" he said.

"To know this data is very important to make judgments on projections for the future."

Russian President Dmitry Medvedev said on Wednesday that actual regulation of prices would be impossible but that $70-80 a barrel was a good range.

Canadian spokesman Dimitri Soudas agreed. "You can't control oil prices if you don't control supply and demand. Hence, fixing of oil prices is unworkable."

G8 nations agreed on Wednesday to try to limit global warming to 2 degress Celsius (3.6 Fahrenheit) against pre-industrial levels and cut greenhouse gas emissions by 80 percent, but failed to persuade China and India to join a bid to halve world emissions by 2050.

The IEA, an agency of the Organization for Economic Co-operation and Development, said on Thursday that investment in energy efficiency and clean technolgoy would need to increase four-fold to keep temperature rises below 2 Celsius.