life in financial markets: no point in blaming oil speculators

My initial observation tells me that it is not correct to blame traders and speculators in energy markets for the rise in prices of crude oil worldwide. Now it is the turn of Saudi Arabia's self-imposed rulers to blame the oil speculators -- read this newsreport, one among many today.

Last week, USA's commodities market regulator, Commodity Futures Trading Commission (CFTC), forced the IntercontinentalExchange Futures Europe (ICE Futures Europe) to impose position limits on the futures contracts on West Texas Intermediate (WTI) Light Sweet Crude Oil. This crude is processed by US refineries and sold to American fuel-guzzlers.

This move by CFTC followed perceived fears of heavy speculation in the futures trading causing the WTI crude prices to rise sharply. There are couple of reasons why oil speculators need not be blamed for the price hike. This newsreport highlights some.

Additionally, see below a trading volume chart (click on the image for clear resolution) I prepared from ICE Futures Europe trade data below comparing WTI crude futures with Brent crude futures and showing there is no unusual surge in daily trading volume. From the beginning of this year to 18 June the daily volume has largely ranged between 150 million barrels per day (mbpd) and 350 mbpd. The trading, in fact, has been higher in the ICE Brent Crude futures contract that has seen daily volume go as high as 500 mbpd in the last two months. Brent crude is largely processed in northwest European refineries and sold to European fuel-guzzlers.