The WSJ reckons the FSA is limbering up to "clear" oil speculators against the accusation that it is they who have caused recent oil market price swings and (which is not the same thing) volatility. This, at exactly the moment when the CFTC is said to be about to make that very case, reversing their previous position.
I was fairly adamant that it wasn't the speculators, until about 9 months ago when, despite my strong a priori inclinations I began to have doubts:
- the run to $147 bore all the hallmarks of a ramp
- starting last year, the front end of the WTI curve started being self-evidently distorted by dysfunctional ETF activity (covered extensively by Alphaville; go to their Commodities tag)
- Brent is a very strange, non-canonical market and the underlying physicals are becoming less liquid (again); so notwithstanding excellent overall liquidity there are ample grounds to be cautious.
There's another, ad homines issue: the FSA - sorry to have to say this - is notoriously ignorant about commodities (*sounds of gasping in the wings*). They have been silent on a whole range of glaring commodities 'issues' over the years in a manner that makes one conclude they just don't really care ('no widows and orphans in oil trading, old chap!'), and/or they really don't know what's going on. The Treasury certainly don't, and nor do HMRC, which leaves us ... where, exactly ? An OTC free-for-all, that's where.
Let's see the respective FSA and CFTC reports in due course. The former will probably be very short indeeeed.