GENEVA: Energy ministers from oil-producing countries called on Monday for tougher rules on speculation in commodities, which they said were

undermining investment to ensure energy supplies. “We are now encouraged to see some countries taking steps to introduce regulatory reforms to financial markets and commodity trading practices,” Ecuador’s oil and mines minister, Germanico Pinto, told a commodities forum at the UN in Geneva. “It is a step in the right direction,” said Pinto, the current president, OPEC.

The UN commodities forum, which will go on till Tuesday, brings together a host of mining and energy ministers and top executives to discuss mineral resources, policy challenges, commodity finance and risk management, legal and regulatory challenges and the impact of the global financial crisis. Pinto said that increased speculation had led to excessive volatility in prices, creating difficulties for both consumers and producers, by confusing the outlook for investment plans.

The Commodity Futures Trading Commission (CFTC), the top US futures regulator, proposed in January to impose stricter limits on speculators in energy markets. Analysts have raised concern about the measures but oil ministers welcome them. “We ask for more greater oversight of oil and commodity markets,” UAE oil minister Mohammed bin Dhaen al-Hamli said. “We need greater regulation which is why we welcome recent moves from the CFTC.”

Qatar’s minister of state for energy and industry, Mohammad al-Sada, said market uncertainty, stemming from a lack of transparent data on supply and demand, was fuelling speculation. “This can result in speculators creating a momentum for price movements which clouds market signals leading to long-term impact on future supply,” Sada said.

Oil fell more than 1% to below $80 a barrel on Monday, weighed down by the firmer dollar, worries over Greece’s debt, and ample oil supplies. Mr Pinto said the recent relative stability in prices — which have traded between $65 and $85 a barrel since last summer — was likely to last through the end of the year. “The situation we have now, of relative stability, is good for producers to develop investment in the oil industry,” he said.

“The stability will last for the rest of the months in this year.” Petromatrix analyst Olivier Jakob from Zug Switzerland said oil prices might drift lower in the coming months. “The CFTC’s proposed rules on limits in the oil market could see a shift towards the end of the year in some of the commodity indices which will bring some pressure to the oil markets.”

Richard Jones, deputy executive director of the consuming nations group International Energy Agency (IEA), said there was little evidence that financial market activity in commodities was driving volatility, with one study suggesting that only 0.34% of volatility in US crude West Texas Intermediate was due to positions taken by money managers. Fluctuations in commodity export earnings affect the financing of poverty reduction programmes, diversification of production and industrialisation, said Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade

and Development (UNCTAD), which is hosting the forum. “Increased stability in commodities markets would therefore be more conducive to development from the perspective of both exporters and importers,” he said.

Both Sada and Pinto warned against unrealistic forecasts of the role of alternative energy sources in consumer countries. Fossil fuels would continue to meet more than 80% of world energy needs in 2030, Sada said. “A prolonged period of low oil prices will undermine investments

in projects that are vital if we are to meet future oil demand,” he said.

Pinto said alternative fuels would be slow to gain momentum, and OPEC was continuing to invest in both upstream and downstream projects to ensure future demand. “We are confident that current investments will satisfy demand for OPEC crude and also continue to provide a comfortable cushion of spare capacity,” he said.