Has There Been Excessive Speculation in the U.S. Oil Futures Markets? What Can We (Carefully) Conclude from New CFTC Data?
17 Pages Posted: 20 May 2015
Date Written: November 4, 2009
Even though there were numerous plausible explanations for the oil-price rally that culminated in July of 2008, there remains much uncertainty on how much to ascribe this rally to speculation, given the lack of transparency in the global oil markets. Was there excessive speculation in the oil markets?
Many facets of the world oil markets are, indeed, too opaque, including future productive capacity estimates from important suppliers, inventory statistics from important non-OECD consumers, and summary position data from derivatives participants.
The U.S. Commodity Futures Trading Commission (CFTC) has recently shed more light on the latter category. The CFTC released three years of enhanced market-participant data for 22 commodity futures markets in its new "Disaggregated Commitments of Traders" report. With this report, we are able to examine whether the balance of outright position-taking in the exchange-traded oil derivatives markets has been excessive relative to hedging demand during the past three years.
Using a traditional metric for evaluating speculative participation, we find that the level of outright position-taking in U.S. exchange-traded oil derivatives contracts has largely fluctuated in a normal range based on historically relevant benchmarks.
Keywords: Commodity Futures Trading Commission, CFTC, oil, futures market, hedging, speculator
JEL Classification: G1, G18
Suggested Citation: Suggested Citation