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Has There Been Excessive Speculation in the US Oil Futures Markets?

What Can We (Carefully) Conclude from New CFTC Data?

Authors :
Hilary Till
,
Research Associate, EDHEC-Risk Institute,
Principal, Premia Capital Management, LLC.

Because many facets of the global oil markets have not been sufficiently transparent, it is unclear how much of the oil-price rally that peaked in July 2008 can be put down to speculation.

EDHEC Position Paper

EDHEC Position Paper

This uncertainty has led to concerns that there was actually excessive speculation in the oil derivatives markets. In an effort to make the oil markets more transparent, the U.S. Commodity Futures Trading Commission has recently launched the Disaggregated Commitments of Traders report. This report includes three years of enhanced market-participant data for twenty-two commodity futures contracts. This report makes it possible to examine whether, over the last three years, speculative position-taking in the exchange-traded oil derivatives markets has been excessive relative to commercial hedging needs. We use a traditional metric for evaluating speculative position-taking and find that this position-taking does not appear to be excessive over the past three years when compared to the scale of commercial hedging at the time.
Type :
Position Paper
Dates :
Created on November 18, 2009
Further information :
For more information, please contact Joanne Finlay, EDHEC Research and Development Department [ joanne.finlay@edhec.edu ]

The contents of this paper do not necessarily reflect the opinions of EDHEC Business School.

Finance


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