Speculators Are Largest U.S. Oil Contract Buyers (Tina Seeley)

June 23 (Bloomberg) -- Speculators became the largest players in oil futures markets, nearly doubling their share in the past eight years as prices rose to records, in a "radical shift" for the market, according to a congressional committee. 

In January 2000, speculators controlled 37 percent of contracts to buy West Texas Intermediate crude oil on the New York Mercantile Exchange, with the rest held by physical hedgers, including refiners and airlines that need to hedge against delivered fuel costs.

By this April, speculators controlled 71 percent of the contracts, according to data provided to the House Energy and Commerce Committee by the Commodity Futures Trading Commission.

{xtypo_quote_left} "It seems fair to ask whether a 20-fold increase in commodity index investment is contributing to a bubble in oil prices," Stupak said.   {/xtypo_quote_left}

"Energy speculation has become a growth industry and it is time for the government to intervene," Representative John Dingell, the committee chairman, said at a subcommittee hearing today.

The hearing by the Subcommittee on Oversight and Investigations focuses on speculation in energy markets, including testimony from Walter Lukken, acting chairman of the CFTC; and Doug Steenland, chief executive officer of Northwest Airlines.

"The CFTC data illustrates a radical shift in the oil futures market from one used mainly by buyers and sellers to hedge price risk to one where most of the participants are speculators," according to a memorandum prepared by committee staff.

Read More: Bloomberg