Hedge fund transparency key to curb oil spikes: IEA

L’AQUILA, Italy (Reuters) – More information on hedge funds and greater transparency on who is dealing in commodities futures markets is essential to the G8 aim of reducing oil price volatility, the head of the International Energy Agency said.

IEA Executive Director Nobuo Tanaka also forecast a “very strong rebound” in oil demand in 2010 as global economic growth picks up after this year’s crash. The Paris-based agency is due to publish its detailed forecast for next year on Friday.

In a statement on Wednesday, the Group of Eight rich nations called for international institutions, including the IEA, to reduce excessive volatility in oil price. Crude futures hit a record level of $147 a barrel last year before tumbling below $40 months later due to the international financial crisis.

“Transparency in the futures market is certainly the issue: who is trading, is it a commercial trade or a non-commercial trade. We need more transparency,” Tanaka told Reuters in an interview on the sidelines of an expanded G8 summit in Italy.

“But we think still that (market) fundamentals are more important to determine the direction of the oil price: speculation is amplifying the movement upwards or downwards but not necessarily determining the price of oil,” Tanaka said.

He warned that oil markets could be “really tight” by 2014-2015 unless there was an increase in production and exploration investment. He compared the scenario to last year’s market, when oil prices spiked to $147 a barrel.

Reuters