UPDATE 3-Speculators' role uncertain in oil prices - CFTC

(Adds traders exceeded position limits; paragraphs 7-10, 19-21 new)

By Tom Doggett and Charles Abbott

WASHINGTON, Sept 11 (Reuters) - The U.S. futures market regulator on Thursday said it could not determine whether speculators were to blame for the run-up in crude oil prices this year.

Many U.S. lawmakers blame speculators for the big increase in crude oil and other commodity prices, and are calling for legislation to rein in excessive speculation.

But in a much-anticipated report to Congress on the impact of speculators on the energy markets, the Commodity Futures Trading Commission said it was not able to "quantify the amount of speculative trading occurring in the futures markets."

In one of its key recommendations to increase transparency, CFTC said the agency needed to classify traders more accurately in its market reports. It recommended removing swap dealers from the commercial category and creating a new swap dealer classification for reporting purposes.

Based on information the CFTC requested from 32 market participants, the agency said the amount of commodity index trading was estimated at $200 billion as of June 30, of which $161 billion was tied to markets regulated by the CFTC.

Of the $161 billion, about 24 percent was held by index funds, 42 percent was held by institutional investors, 9 percent by sovereign wealth funds and about 25 percent by traders that were largely made up of retail investors.

"While there was an increase in the net notional value of commodity index business in crude oil futures, it appears to be due to an appreciation of the value of existing investments caused by the rise in crude oil prices and not the result of more money flowing into commodity index trading," the CFTC said.

CFTC staff said it found 18 noncommercial traders whose combined holdings on exchanges and in the over-the-counter market exceeded speculative limits on 35 instances on June 30.

"It was not a significant amount in excess," said CFTC chairman Walt Lukken at a House Agriculture Committee hearing, so it did not suggest that swaps markets were a huge loophole.

As a matter of fairness, said Lukken, the question of position limits that apply equally "is something we should consider."

At another point, Lukken told the committee there was no strong evidence that speculators were driving up prices. But that statement reflects the fact that the CFTC cannot clearly identify those traders.

The CFTC's staff other recommendations included:

* Develop and publish a new periodic supplemental report based on OTC swap dealer activity.

* Create a new CFTC Office of Data Collection, whose sole mission is to collect, verify, audit and publish all the agency's commitments of traders information.

* Establish more detailed reporting standards for certain large traders on regulated futures exchanges to ensure a more precise picture of their trading activity.

* Continue to encourage the clearing of OTC transactions.

* Conduct a review of swap dealers' futures trading activity to ensure that it is sufficiently independent of any affiliated commodity research.

The recommendations do not go as far as an anti-speculation bill drafted by the committee over the summer. The bill would require CFTC to monitor over-the-counter trading and to impose position limits if needed to prevent market disruptions. The bill also would increase CFTC staffing, require foreign exchanges to adopt U.S. reporting standards and position limits, and require position limits on major contracts.

The bill was defeated in July in a partisan dispute over offshore drilling. Lawmakers say it may be revived in the autumn session of Congress.

CFTC Commissioner Bart Chilton dissented from the staff report, saying the CFTC needed the power to regulate over-the-counter trading if it caused pricing problems on futures markets. Chilton said the CFTC should not issue exemptions for hedge funds. (Additional reporting by Ayesha Rascoe, editing by Russell Blinch and Jim Marshall)