The UK’s Financial Services Authority is calling in big oil companies, hedge funds, banks and oil traders next week for a closed-door discussion on “whether the current arrangements [in the oil market] remain appropriate”.
Where are the concerns coming from? The meeting comes hot on the heels of the first round of hearings by the CFTC, held this week, after which the US regulator looks almost certain to impose more limits on trading positions in energy commodities markets.
All of this has suggested to some in the industry that the FSA is just playing catch-up and wants to be seen taking a more proactive role.
But the FSA said representatives from the Treasury will also be at the meeting, which raises another possibility of what is driving this newfound concern at over commodities. The UK government has recently aired concerns that high oil prices could threaten economic recovery. Alistair Darling, the chancellor, made this clear when he told the FT that high and volatile oil prices “has the potential to be a huge problem as far as the recovery is concerned”.
A few weeks later Gordon Brown and Nicolas Sarkozy called for more international co-ordination of energy price monitoring ahead of the G8 meeting, and for more investigation from the International Organisation of Securities Regulators. “Discussions should look again into the question of whether trading activity is amplifying erratic price movements,” they wrote in the Wall Street Journal.
Then there was the PVM scandal earlier this month, in which a rogue trade appeared to push oil prices higher and brought the company $10m of losses.
So it seems likely several factors are behind this move.
But will it just be for show? Expectations of anything concrete coming out of next week’s meeting are low:
British officials appear unconvinced a change in position limits is necessary and it is unlikely that next’s week meeting will pay the way for any change, market officials said.