Oil Short Squeeze Prompts Call to Curtail Speculators (Tina Seeley)

Sept. 23 (Bloomberg) -- U.S. lawmakers may seek to include commodity speculation limits in legislation designed to rescue banks from bad mortgage investments after a squeeze in oil trading sent crude to a record gain. 

Crude oil for October delivery yesterday climbed more than $25 a barrel in New York Mercantile Exchange trading, before settling 16 percent higher at $120.92 as the contract expired. The fluctuation, the biggest since Nymex crude trading started in 1983, prompted the Commodity Futures Trading Commission to say it was "closely monitoring" prices for manipulation.

{xtypo_quote_right} Anti-speculation language "absolutely should be included because otherwise, the guys who are getting bailed out are going to have free reign over these commodity markets," said Michael Masters, of hedge fund Masters Capital Management.{/xtypo_quote_right} 

"I know for a fact that some members of Congress are working to include speculation legislation in the financial markets legislation," CFTC Commissioner Bart Chilton said yesterday in an e-mail. ``Those efforts, I think, may get fueled by the large spike in oil prices.''

Any move to include commodity limits in the legislation to rescue Wall Street risks encountering opposition from the administration and delaying the law. President George W. Bush called on Congress not to load the $700 billion legislative rescue plan with "unrelated provisions."

Oil soared yesterday as traders who had sold the October contract had to buy the futures back on the last day of trading, rather than try to make delivery from inventories that had declined in the wake of Hurricane Ike. Oil for November delivery rose just 6.4 percent to $109.37 yesterday. November crude, which is the most active contract, was trading at $106.99 at 10:49 a.m. London time today, 2.2 percent down.

more

Read More: Bloomberg