Top Investor Tells Regulators Speculation Helps Energy Markets

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"Speculators shouldn't be blamed for the huge swings in oil and natural gas prices. . ."

Speculators shouldn't be blamed for the huge swings in oil and natural gas prices over the past 18 months, a leading commodity investor told government regulators Wednesday.

John Hyland, chief investment officer for a firm that manages oil and natural gas funds, said his funds have instead helped reduce price volatility by buying oil and gas futures as prices fell and selling as prices rose.

"The funds' activities in the futures market have resulted in little or no price disruption," Hyland said in a hearing before the Commodity Futures Trading Commission.

The hearing was the last of three to explore whether the CFTC will set limits on speculative trading by financial investors.

For more than a year, Hyland and other speculators have been scrutinized by Congress, regulators and even oil traders, who blame them for driving oil and gas prices to record levels last year.

Hyland's U.S. Commodity Funds LLC operates index funds tied to the price of oil and natural gas. The firm has grown precipitously in recent years, and some regulators and lawmakers charge that such funds have made energy prices more volatile.

Hyland's U.S. Oil Fund's net asset value increased more than 11-fold from May 2006 to June 2009. The fund's current value is estimated at $2.25 billion. It controlled 3% of all crude oil traded on the New York Mercantile Exchange as of Monday and at one point this year, it controlled closer to 20%.

CFTC Chairman Gary Gensler, in a potential shift from the Bush administration's more hands-off approach, said Wednesday the commission "should seriously consider" limiting the positions that investors can take in the energy markets.

Gensler said last month the agency may propose new rules setting limits in the fall.

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