SEARCH BLOG: OIL
A few days after oil speculation "expert," Michael Masters expounded on the evils of commodity speculation, the NY Times reports maybe not.
Well, that about clears up everything. Does not! Does too!
That earlier report, by Michael W. Masters and Alan K. White, blamed high commodity prices on the growing role of institutional investors, specifically index funds. It was cited by several lawmakers as proof that new rules were needed to curb the impact of speculation on commodity prices.
But the new 69-page study, by the Commodity Futures Trading Commission, shows that, rather than rising, the stake of index funds in the oil market actually declined in the first half of this year.
“That certainly doesn’t mesh with the story Mr. Masters is telling,” said Prof. Dwight R. Sanders, an agricultural economist at Southern Illinois University in Carbondale, who has studied both reports.
The dollar value of those fund positions did rise, to $51 billion from about $39 billion, according to the new study. But the increase reflects only the impact of rising oil prices — not the flow of new money into the market, the report found.
When counted in terms of separate futures contracts, the funds’ stake fell 11 percent during that period, to 363,000 contracts from 408,000 contracts, according to the study.
The study also showed that index funds have a much smaller share of the market than previously estimated — 17 percent of all futures and options involving domestically traded commodities, as of June 30. Their net stake in oil markets was just 13 percent, not the 70 percent or more cited in previous estimates.
Mr. Masters, a hedge fund manager who has frequently testified before Congress, said in an e-mail message Thursday that he was “delving into the numbers” in the new C.F.T.C. report “to understand what they do and do not encompass.” He hoped to have more to say when he testified on Tuesday before a Senate energy subcommittee, he added.