Yesterday’s price action on the oil trading market which saw the WTI oil contract fall almost 3 dollars seemed to suggest the  loosening of the hitherto tight correlation between a weak US Dollar & buoyant equity markets.  However, this explanation is insufficient as equities held up  reasonably well and the dollar was still relatively weak but another explanation may lie with the ongoing saga of the CFTC and their attempt to end excessive oil price speculation.   With the CFTC expected to announce new limits on energy trading in the autumn, some leading ETFs and Exchange Traded Note funds are already started to withdraw from the oil market either by liquidating long positions or halting the issue of new shares.  According to the FT, Deutsche Bank’s PowerShares DB Crude Oil Double Long ETN and the United States Natural Gas Fund, or UNG, have both said they would halt new share issues because of “current and anticipated new regulatory restrictions and limitations”.   Whether the proposed action by the CFTC will take the speculation and volatility out of the oil market remains to be seen.  Indeed according to John Hyland, Chief Investment Officer for UNG  contends that ” the  proposed direction the CFTC is looking to go is likely to produce results that are very much the opposite of what they seem to desire,” Mr Hyland said. “They apparently are seeking an outcome of low prices and low volatility as being an ‘ideal state’. By eliminating financial investors from the marketplace and leaving it totally in the hands of oil companies, physical energy traders, and Opec, they are likely to end up with neither low prices nor low volatility.”    Yet another layer of complexity added to oil trading.

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