French President Nicolas Sarkozy, UK Prime Minister Gordon Brown and French Foreign Minister Bernard Kouchner, at a meeting on Monday, July 06, 2009, at Evian, on the edge of Lake Geneva.

New trading curbs on excessive speculation in oil and other commodities are being examined by US regulators and both the UK and France on Wednesday called for measures to make the oil futures markets more transparent.

Federal regulators announced on Tuesday that they were considering new restrictions on “speculative” traders in markets for oil, natural gas and other energy products.

Gary Gensler, new chairman of the Commodity Futures Trading Commission, said the agency would decide whether federal speculative limits should be set on “all commodities of finite supply,” in particular oil, natural gas and energy commodities.

In an opinion article submitted to The Wall Street Journal, UK Prime Minister Gordon Brown and French President Nicolas Sarkozy wrote that governments need to act to curb a "dangerously volatile" oil price that defies "the accepted rules of economics" and"could undermine confidence just as we are pushing for recovery."

The Journal says the moves come at a time when the hotly debated idea that speculative investors are driving up prices is gaining credence, and political momentum is building to stop them. In recent months, oil producers and Asia's biggest oil-consuming nations have called for regulators to address the issue of price volatility, and the US Senate has blamed speculators for high commodity prices.

On Tuesday, Senator Byron Dorgan, a backer of an anti-speculation bill last year, called the CFTC's action "a positive first step" to curbing "oil speculators looking for a quick buck at the expense of American consumers."

Last July, when Nymex crude hit an all-time record high of above $147 a barrel, investors had about $300 billion outstanding on energy indexes, roughly four times the level in January 2006, according to the International Energy Agency, the Paris-based watchdog of developed country energy users, including Ireland. Investments plunged in oil and other commodity markets during the second half of 2008, but have risen, partly as a hedge against inflation and a weaker dollar: JP Morgan Chase analysts estimate that a net $25 billion has poured into commodities in the first half of 2009.

Nicolas Sarkozy and Gordon Brown called on the International Organization of Securities Commissions to look at improving transparency and supervision in oil-futures markets. An umbrella organisation for global securities regulators, IOSCO helps to set global standards and advises national bodies on regulation. In March, it set out guidelines on how regulators can improve supervision and enforcement of behavior in commodities markets.

The French and British leaders will bring up the issue at the summit of the Group of Eight (G-8) leading industrial countries that begins in Italy, Wednesday.

Gary Gensler of the CFTC, told the Senate this year at his confirmation hearings that commodity index funds and other investors had “participated in the commodity asset bubble” in 2008. Since the start of March, oil prices have jumped more than 60 per cent, partly attributed to speculators looking to gain exposure to any sharp rebound in business activity, according to market participants. On Tuesday, oil closed below $63 a barrel, and has fallen 14 per cent over the past month as investors worry that a slow economic recovery will reduce demand for energy.

In a related development Tuesday, US federal regulators froze the assets of a company accused of running a $485 million Ponzi scheme focused on the oil and gas industry.

In a statement Tuesday, the Securities and Exchange Commission said the scheme was orchestrated by three Dallas businessmen through a company called Provident Royalties.

The SEC alleges that from at least June 2006 through January 2009, Provident made a series of fraudulent securities offerings involving oil and gas assets through 21 affiliated entities to more than 7,700 investors throughout the United States. Provident’s entities made some direct retail sales of securities, but primarily solicited retail broker-dealers to enter into placement agreements for each offering, and those retail broker-dealers sold the stock to retail investors nationwide.

Video  - - John Authers of the FT comments on commodity speculation