Friday, September 25, 2009
And so it Begins
The mere whiff of US regulators poking their noses into energy markets, those last bastions of government-sanctioned bribery and cowboy-style trading, has sent everyone scrambling offshore. S&P is considering an excluding-US GSCI style index, citing interest from investors to freely access commodities exposure. United States Commodity Funds (proud owners of the market-moving USO oil and USG natural gas ETFs), have already filed for permission to create a Brent-related one. Platt's is looking into setting up an index that would give investors exposure to physical commodities, according to Reuters. Presumably if an investor has a physical position then he can play around with futures willy-nilly. None of this news is good for those who want to stamp out oil speculation. Just because speculation may be curtailed on Nymex (and to a lesser extent on ICE) doesn't mean that prices of US futures won't be affected by speculators elsewhere going forward. Asian and Middle Eastern exchanges have been trying unsuccessfully to break into the oil futures markets for decades. But they have always been beaten down by the dominant US and UK ones. Their day in the sun may have arrived. I have said it before and I'll say it again: there was a good reason that Goldman Sachs and Vitol bought 20% of the Dubai Mercantile Exchange. And it wasn't because they like wadi-bashing.