Price discovery of crude oil can not be left entirely unregulated: Jaipal Reddy

RIYADH - Petroleum Minister S. Jaipal Reddy on Wednesday said there is a need to improve the understanding of inter-linkages between the physical and financial markets to address the issue of price volatility and price discovery.

Speaking at the International Energy Forum (IEF) in Riyadh, Reddy blamed unregulated over-the-Counter (OTC) transactions and trading in ‘paper barrels’, along with unbridled speculation activity for the unprecedented oil price rise in 2008.

The minister emphasized the strengthening of current regulatory framework for commodity futures and derivatives market.

“We need to consider establishing position limits and moving OTC activity on to regulate exchanges.” Mr. Reddy said

“The initiatives being taken in the US, UK and other countries are steps in the right direction, to bring in regulatory oversight of the physical and financial markets” he added.

Reddy extended Indian support for further initiatives by IEF and other international organisations, for putting in place suitable regulatory mechanisms, to prevent a occurrence of 2008.(ANI)