NEW YORK (Reuters) - Blaming speculation for high oil prices is just a “crutch” for those not wanting to look at the supply and demand situation when it spiked to $147 in 2008, Intercontinental Exchange (ICE.N) Chief Executive and Chairman Jeffrey Sprecher said on Tuesday.
ICE and its rival exchanges face regulatory initiatives as governments look to prevent another financial crisis that started not long after crude oil futures prices spiked to a record $147 in July 2008.
Oil producers and consumers meeting on Tuesday at the International Energy Forum in Mexico are calling for greater oil market stability and transparency.
“I don’t know how to even go about addressing their concerns because every study that’s been done, including studies that we’ve done ourselves, have shown that speculation was not the cause of the rise to $147 oil,” Sprecher said at the Reuters Global Exchanges and Trading Summit.
Nobuo Tanaka, head of the International Energy Agency, said that OPEC, the IEA and the IEF have developed a plan to address oil market volatility.
“I think it’s just convenient for people to use speculation as a crutch for why prices went up instead of looking at the underlying supply and demand and fears that were in the market at the time it went up to $147,” said Sprecher.
The U.S. Commodity Futures Trading Commission has proposed regulations to limit how many energy contracts hedge funds, banks and other speculators can control.
The proposal is up for public comment until April 26.
“I don’t know where the consensus view is, but ... I suspect that the proposal will be heavily commented on and there’ll be some modifications made,” said Sprecher.
Asked if the CFTC could address its concerns without Congress mandating oversight of over-the-counter markets, Sprecher said “it was possible, but I think you’ve heard various commissioners say that they would like to have OTC oversight to really be effective.”
Sprecher said he was not seeing trading shift away from the United States because of concerns about anticipated market regulation, and pointed out that ICE had position management rules it had to follow in the United Kingdom.
“So I haven’t seen that there’s a sense of regulatory arbitrage between the U.S. and Europe,” Sprecher said.
“What I have seen, however, is there’s been a lot of growth coming out of our European energy business because those are the products that are used for hedging Asian business. And the growth is really being driven by continued energy demand out of Asia.”
Sprecher said he did not know when the iron ore market would require a futures contract but that ICE was positioning itself to be ready as the market shifts from annual term pricing.
“We’ve already launched some clearing for iron ore contracts in anticipation of the market becoming shorter duration for risk pricing. We’ve been active throughout the Asian basin primarily marketing those clearing services.
“Our goal is to start with trying to clear the swaps business that exists there around it,” said Sprecher.
Producers Vale and BHP Billiton have decided to price iron ore to Japanese steelmakers quarterly from April 1, a signal of a shift from annual fixed-price deals that have had miners lose revenue as spot prices rocketed.
Reporting by Robert Gibbons; Editing by Richard Chang