CHICAGO (Reuters) - U.S. derivatives regulators and environmental officials should probe for possible manipulation in the market for U.S. biofuels credits after prices surged for unknown reasons, an association representing the ethanol industry has said.
The Renewable Fuels Association, in a letter dated Aug. 1, encouraged the heads of the Commodity Futures Trading Commission and the Environmental Protection Agency to determine “whether certain parties may be exerting undue influence on prices or otherwise engaging in manipulative practices.”
Last week, prices neared three-year highs as traders raced to buy credits, giving the thinly traded and opaque market a sudden jolt.
The association said it was concerned about “recent irregular activity and volatility” in the market for Renewable Identification Number credits (RINs), which it said had climbed about 30 percent since mid May. The “real reasons” for the increase are unclear, according to the letter.
“The recent spike in RIN prices appears contrived and driven by something other than basic supply-demand fundamentals,” the association said.
Representatives of the CFTC and the EPA did not immediately respond to requests for comment.
In March, the agencies signed a memorandum of understanding regarding RINs, under which the CFTC agreed to help the EPA conduct investigations into possible fraud and market abuse.
Three years earlier, more than a dozen U.S. lawmakers urged the CFTC to examine potential fraud and manipulation in the cash market for RINs, following an unprecedented 2,900 percent spike in prices that year.
Reporting by Tom Polansek; Editing by Andrew Hay
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