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Chevron: production low, but profits hit the roof October 28, 2011

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Chevron’s profits more than doubled in the third quarter, powered by rising prices for crude oil, eventhough production sliped.

San Ramon-based Chevron earned $7.83 billion, up 108 percent from the $3.77 billion Chevron earned in the year-ago quarter. Revenue jumped 29.6 percent and totaled $64.43 billion in the July-September quarter.

Profits topped Wall Street’s predictions. The company earned $3.92 a share, while a FactSet Research survey of analysts projected $3.47 a share. Revenue, though, fell short of the expectations of $70.4 billion.

Chevron’s shares rose slightly, 0.2 percent, during the first two hours of trading.

The company’s energy production slipped in the quarter. Chevron product 2.6 million barrels a day in the 2011 third quarter, down 5 percent from a year ago.

“We had another successful quarter,” CEO John Watson said.

The company said the trend of rising oil prices bolstered its exploration, development and production operations, also known as the upstream business. Asset sales and improved margins at its refiners boosted its refining, retail and transportation activities, known as the downstream operations.

Profits from the upstream operations totaled $6.2 billion, up 74 percent from the year before. Downstream profits totaled $1.99 billion, more than triple, or a 252 percent increase from the year-ago quarter.

The company’s refinery operations in the U.S. appear to be faring better. U.S. downstream profits doubled and increased 102 percent, totaling $704 million. The company said margins improved for sales of refined products such as gasoline.

Downstream results in the U.S. also benefitted from lower operating expenses, Chevron said. The company has been trimming its staff in locations such as San Ramon, Concord, Richmond and Houston.

In recent days, Exxon Mobil, Royal Dutch Shell and BP reported a surge in quarterly profits even though they’re producing less oil from fields around the world. Although oil companies, including Chevron, are spending billions to develop new oil and natural gas fields, it could take years or even decades before the fields produce energy and revenue.

Chevron said it continues to make strides in its major capital projects, such as those in Australia.

“The Wheatstone and Gorgon liquefied natural gas projects are expected to provide substantial new energy supplies to meet growing demand in the Asia-Pacific region,” Watson said.

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Glencore sells naphta, Hin Leong buys gasoil October 19, 2011

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Glencore International AG sold naphtha for a third day in Singapore, Asia’s biggest oil-trading center. Hin Leong Trading Pte paid a higher premium for two gasoil cargoes.

Light Distillates Glencore, the world’s largest commodities trader, sold a 25,000 metric-ton, open-specification naphtha contract for the first half of December, according to a Bloomberg survey of traders monitoring transactions on the Platts window.

The company received $907 a ton from BP Plc. Naphtha’s premium to London-traded Brent crude futures increased 83 cents from yesterday to $67.42 a ton at 6 p.m. Singapore time, based on data compiled by Bloomberg.

This crack spread, a measure of refining profit, widened for the second time in three days.

Middle Distillates Hin Leong bought gasoil, or diesel, with 0.5 percent sulfur for a second day in Singapore, according to the Bloomberg survey. The closely held trader paid 40 cents a barrel over benchmark quotes to ConocoPhillips and BP for 170,000 barrels each.

That’s a higher premium than 10 cents in yesterday’s transactions. Gasoil’s premium to Asian marker Dubai crude fell 91 cents to $15.22 a barrel at 2:31 p.m. Singapore time, based on data from PVM Oil Associates Ltd.

Oil volatility: will the Fed make its effect? September 21, 2011

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Oil options volatility slipped as the underlying futures rose for the first time in three days on speculation the Federal Reserve will take steps to bolster the U.S. economy, increasing fuel consumption.

Implied volatility for at-the-money options expiring in November, a measure of expected price swings in futures and a gauge of options prices, was 40.9 percent at 1:18 p.m. in New York, down from 42 percent yesterday.

Oil for October delivery gained $1.02, or 1.2 percent, to $86.72 a barrel on the New York Mercantile Exchange. Prices have fallen 5.1 percent this year. October futures expire at the close of floor trading today. The more active November contract advanced $1.09 to $86.90 a barrel.

The most active contract in electronic trading today was November $70 puts, with 1,473 lots changing hands. The options fell 12 cents to $1.43 a barrel. December $85 puts, the next- most-active options, slipped 36 cents to $5.12 a barrel on volume of 1,449 lots. One contract covers 1,000 barrels of crude.

The volume of puts outnumbered calls by more than two to one in electronic trading.

The exchange distributes real-time data for electronic trading and releases information on floor trading, where the bulk of options trading occur the next business day.

November $105 calls were the most active options traded in the previous session, with 7,374 lots changing hands. They fell 3 cents to 14 cents a barrel. The next-most active options, November $75 puts, gained 33 cents to $1.20 a barrel on volume of 4,664.

Open interest was highest for December $100 calls with 52,308 contracts. Next were December $70 puts with 45,925 and December $50 puts with 45,258.

Gennady Timchenko to control construction giant ARKS September 13, 2011

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Gennady Timchenko’s energy trading company Gunvor recently acquired a stake in construction giant ARKS and bought an option to take control of the company. A new step forward for the Finnish businessman’s diversification strategy.

A month after gaining control of mining company Kolmar Coal (51%) for approximatively $400 million, Gennady Timchenko’s Gunvor, the third independent energy trading company in the world, goes further with ARKS.

The company acquired last week 21% of one of the leading Russian construction company, ARKS, in order to diversify from oil and gas business. The Moscow-based company is notably specializing in building roads and highways in the Moscow region.

According to Russian newspaper Kommersant, Gennady Timchenko bought 21% of the building company for $200 million. Moreover, the businessman received an option to take control within a few months.

Founded in 2003, the ARKS group was formerly known as UM #4, Russian oldest construction company (since 1926). The group has three main affiliates: Create Story (construction), UM #4 (demolition) and Nataland (engineering services).

Since 2010, Gunvor has launched a wide diversification strategy. According to analysts Gunvor’s recent moves are a bid to curb the company’s reliance on oil and gas, which currently represent most of Gunvor’s turnover.

Gunvor founder and co-owner Gennady Timchenko is a Finnish businessman with Russian origins, specializing for decades on Russian oil and infrastructures.

$12 billion shale gas deal for BHP Billiton August 26, 2011

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BHP Billiton has made another big bet on energy in the US, announcing an agreement to buy Petrohawk, an independent oil and gas company, for $12.1bn in cash.

In its biggest acquisition to date, the Anglo-Australian mining group said on Thursday it had agreed to pay $38.75 a share for Petrohawk, which operates in three leading areas of shale gas and oil production in the US. The deal values Petrohawk at $15.1bn including net debt.

Marius Kloppers, BHP chief executive, said the acquisition would be earnings accretive in its first full year of consolidation as he defended the 65 per cent premium the miner had agreed pay for Houston-based Petrohawk shares compared to their Thursday closing level.

“Petrohawk is attractive to us because it is in the large, liquid North American market where you can sell the gas,” Mr Kloppers said. “When making an acquisition, particularly one like this, the majority of the value is paid for the resources in the ground.”

BHP boosted its energy business in February with a deal to buy Chesapeake Energy’s Arkansas-based gas business for $4.75bn – its first acquisition since last year’s failed $39bn attempt to buy PotashCorp of Canada. That deal represented the group’s first venture into US shale, giving the company 87,000 acres of leasehold gas properties.

Exxon Mobil, Chevron, BP, Total and Statoil have also bought US shale assets in recent years. The sector has boomed because the gas is considered a better alternative to coal for power generation due to its lower carbon dioxide emissions

The gas, trapped thousands of feet underground, is released by opening up the shale rock with a process known as hydraulic fracturing, or “fracking”, in which thousands of tonnes of water, sand and other additives are pumped underground under high pressure.

BHP said on Thursday that the Petrohawk deal would more than double its petroleum division’s resource base and increase proved reserves by 30 per cent.

With the acquisitions of Chesapeake and Petrohawk, the company will have more than tripled its resource base from 3.7bn barrels of oil equivalent to 11bn boe within the last year.

It forecast its energy business would expand to a 1m boe per day business within five years, compared to less than 500,000 boe per day in the 2010-11 financial year.

Petrohawk had been undervalued relative to peers, people familiar with the deal said, as the company faced capital constraints in developing its large portfolio of assets. The price on offer from BHP reflects about 7.5 times forecast earnings before interest, tax, depreciation and amortisation in 2012, in line with where other companies in the sector trade, they added.

Petrohawk, in contrast, has recently traded closer to 4.5 to 5 times forecast ebitda.

Petrohawk operates in the Eagle Ford and Haynesville shales in Texas and Louisiana as well as owning substantial acreage in the Permian Basin, an oil-rich shale in Texas.

Its assets cover about 1m acres and are expected to produce about 158,000 boe per day in 2011. At the end of last year the company, which was founded by energy entrepreneur Floyd Wilson in 2003, reported proved reserves of 3,400bn cubic feet of natural gas equivalent.

Barclays Capital and Scotia Waterous advised BHP on the deal. Goldman Sachs advised Petrohawk.

The offer will be financed from BHP’s cash balances and a new credit facility.

Just as BHP bought Athabasca Potash in Saskatchewan, Canada for under $1bn a few months before launching a $39bn bid for PotashCorp, its acquisition of the Fayetteville shale gas assets this year was a precursor to a much larger play in an alternative commodity class.

Like potash, the market for shale gas follows different economic cycles to iron ore, copper, and coal, BHP’s principal commodities. BHP’s strategy is to buffer itself against the price volatility inherent in all commodities by positioning itself in top-tier assets across the commodities spectrum.

The Petrohawk deal comes as investors scrutinise the company’s use of cash. BHP last month completed a $10bn share buy-back programme and is pumping money in to the expansion of its iron ore mining complex in Australia.

But the highly cash generative company, which analysts believe could slip into a net cash position this month, has failed to deploy capital on large-scale mergers and acquisitions in the past year.

Oil demand should remain strong, oil getting higher July 13, 2011

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Oil rose Tuesday after the Organization of Petroleum Exporting Countries said global demand will be the highest ever this year, although the “unsteady” global economy may slow demand more than previously thought.

Benchmark West Texas Intermediate crude for August delivery rose 45 cents to $95.58 per barrel in morning trading on the New York Mercantile Exchange. Brent crude, which is used to price many international oil varieties, fell 54 cents to $116.70 per barrel on the ICE Futures exchange in London.

Analysts and investors pay special attention to world demand forecasts. The expectation that China and other developing nations will keep using more crude has supported prices this year despite weak gasoline consumption in the U.S. and a festering credit crisis in Europe that has raised concerns about international demand for oil.

While OPEC thinks global demand will continue to increase this year to the highest levels ever, the monthly report it released Tuesday said that demand won’t grow as much as it previously expected. The cartel said daily world consumption will increase this year by 1.36 million barrels — down from a previous estimate of 1.38 million barrels — to an average 88.18 million barrels.

OPEC said it cut demand expectations “as the unsteady global economy has added risks to the forecast.” The report also said it’s hard to estimate how much oil the U.S. will consume this year. Gasoline consumption fell ahead of the summer driving season as retail prices approached a national average of $4 per gallon. A gallon of regular has since dropped by nearly 35 cents to a national average of $3.636 on Tuesday, according to AAA, Wright Express and Oil Price Information Service. It’s still 92.1 cents higher than the same time last year.

Meanwhile, the Labor Department said Tuesday that job openings were flat in May, suggesting that hiring may not pick up this summer. The U.S. trade deficit also jumped in May to the highest level since October 2008, primarily because of a surge in the price of oil imports at that time.

In Europe markets slumped on fears that Greece’s financial crisis would spread to Italy and Spain. The dollar continued to rise against other major currencies. Oil, which is priced in U.S. currency, tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money.

In other Nymex trading for August contracts, heating oil fell 2 cents to $3.0657 per gallon and gasoline futures lost 2 cents at $3.0515 per gallon. Natural gas gained 1 cents at $4.291 per 1,000 cubic feet.

NYSE: Marathon Petroleum Group enters the big league July 4, 2011

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Marathon Petroleum Corp. has debuted on the New York Stock Exchange as the second- largest U.S. independent oil refiner after surging gasoline prices drove a year long rise in refining stocks.

Marathon Petroleum is being spun off from parent Marathon Oil Corp. (MRO) amid growing investor demand for companies that can capitalize on gasoline prices that rose at twice the rate of crude oil in the past 12 months, said Sam Margolin, an analyst at Dahlman Rose & Co.

The refiner is valued at $14.7 billion in unofficial trading permitted by exchanges to help investors gauge demand, on par with the largest independent refiner, Valero Energy Corp., which has twice the fuel-making capacity. Marathon Petroleum is poised to capture higher margins thanks to upgrades at plants that account for half the company’s oil processing, said Jacques Rousseau, an analyst at RBC Capital Markets LLC.

“It’s seen as a new name in a group of companies that have run up aggressively in the past year, and people think it’s an opportunity to buy a stock that doesn’t have a chart showing a year’s worth of massive gains behind it,” said Margolin in a telephone interview from New York.

Marathon Oil Chief Executive Officer Clarence Cazalot in January revived a plan to split off the refining division after years of frustration that the fuel-producing unit was a drag on the value of the company’s more profitable crude and natural-gas business. Cazalot, a former exploration chief at Texaco Inc., canceled the original spinoff in February 2009 after the global financial collapse deflated equity markets.

Asset Sales

Since then, Marathon Oil has sold off $1.9 billion in refining, storage, pipeline and retail assets, including a plant in Minnesota, and hundreds of convenience stores. The margins earned in the U.S. from processing crude into fuels during that time almost tripled as the recession ended and energy demand rebounded.

Since assuming the top job at Marathon Oil when it was spun off by U.S. Steel Corp. in 2002, Cazalot, 60, has quadrupled net income and expanded the company’s search for oil and gas to Iraq, Indonesia and Poland. On June 1, the company agreed to pay $3.5 billion to Hilcorp Resources Holdings LP for Texas leases that may add the equivalent of 100 million barrels of crude to its reserves by the end of this year.

As a result of the transaction, Cazalot raised his production-growth estimate through 2016 to 5 percent to 7 percent a year from a previous forecast of 3 percent to 5 percent.

Shares Lag

Marathon Oil posted share price gains averaging 7 percent for the past five years, lagging Los Angeles-based Occidental Petroleum Corp. and Anadarko Petroleum Corp. of The Woodlands, Texas, which rose 17 percent and 10 percent a year, respectively. Neither Occidental nor Anadarko engage in refining.

Marathon Petroleum’s margins probably will widen starting in late 2012 after the completion of a $2.2 billion upgrade to the company’s Detroit refinery that will boost its ability to process cheaper crude, RBC’s Rousseau said in a telephone interview.

The Detroit project will increase the refinery’s capacity to handle heavy crude from Canada’s oil sands to 100,000 barrels a day from 20,000 barrels, Rousseau said. Heavy Canadian crude sells for 20 percent to 30 percent less than the lighter types of oil from the Gulf Coast that the Detroit refinery currently primarily runs, he said.

Rousseau, who has an outperform rating on Marathon Petroleum, estimates the Detroit upgrade will add $1 to Marathon Petroleum’s annual per-share earnings. He expects the shares to reach $50 within a year.

“There’s a lot to like with this story,” Rousseau said.

Refining Consolidation

As a stand-alone refiner, Marathon Petroleum will have more volatile earnings than its parent because retail fuel markets tend to fluctuate seasonally, said Ted Harper, an asset manager at Frost Investment Advisors in Houston, who helps manage about $6.8 billion. Frost Investment is a subsidiary of Cullen/Frost Bankers Inc. which held 23,797 Marathon shares as of a March 31 filing.

“They may need to smooth out their earnings stream,” Harper said. Marathon should expand its refining base through acquisitions, or add to its logistics business, which includes the largest U.S. barge fleet, he said.

The U.S. refining industry has consolidated in the past six years as fuel makers, faced with soaring crude costs, cut operating expenses and shed their least-efficient plants. The transactions have included Valero’s 2005 acquisition of Premcor Inc., Western Refining Inc.’s purchase of Giant Industries Inc. in 2007, and Holly Corp.’s planned merger with Frontier Oil Corp., which is expected to close tomorrow.

Texas City

Marathon Petroleum may seek to buy BP Plc’s Texas City refinery near Houston, the biggest U.S. plant ever to be sold as a single asset, said Neil Earnest, practice leader of merger’s and acquisitions at Muse, Stancil & Co., a consulting firm in Dallas.

BP’s Texas City refinery is the third-largest in the U.S. by virtue of 475,000 barrels of daily crude-processing capacity, according to Bloomberg data. The plant is larger than anything in Marathon’s refining portfolio and would provide the ability to export diesel to South America, Earnest said.

BP will have to lower its $2.9 billion asking price for the Texas City refinery before Marathon Petroleum could afford it, said Mark Sadeghian, senior director of energy at Fitch Ratings in Chicago.

Marathon Petroleum will trade under the symbol MPC on the New York Stock Exchange.

Schlumberger goes up despite desappointing results April 21, 2011

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Schlumberger Ltd (SLB.N), the world’s largest oilfield services company, posted a lower-than-expected quarterly profit on Thursday, but said customer demand would rise, sending its share price up.

Oil prices have climbed above $110 a barrel, prompting producers, including Saudi Arabia, to ramp up spending on new fields to increase their output capacity and make up for supplies that have been cut off from Libya.

“The absence of Libyan production worries the oil producers. They do not like too high… oil prices because of the potential it has to destroy demand,” said Chief Executive Andrew Gould. “I think that I’m much more confident that the international stream is going to come back faster.”

Still, Schlumberger’s first-quarter operations were hurt by the unrest in energy-rich countries Egypt, Tunisia and Libya.

Flooding in Australia and poor weather in North America also dampened its business, but Gould said the energy industry was spending heavily to make up for Libya and higher demand for gas and fuel oil in Japan.

One analyst said the company’s profit margins remained healthy compared to its peers.

“They’ve essentially caught up to Halliburton in North American margin performance,” said Kurt Hallead, an analyst with RBC Capital Markets in Austin, Texas.

Halliburton (HAL.N), the global No. 2 in oilfield services and market leader in North America, topped market expectations on Monday, with its first-quarter earnings [ID:nN15257560] boosted by its business in the United States.

Schlumberger’s first-quarter profit rose to $944 million, or 69 cents per share, from $672 million, or 56 cents per share, a year earlier.

Excluding one-time items, Schlumberger earned 71 cents per share, compared with the 76 cents that analysts expected, according to the average on Thomson Reuters I/B/E/S.

Schlumberger warned late last month that turmoil would knock 8 to 10 cents per share off its first-quarter earnings. [ID:nN28176824].

Revenue rose 56 percent to $8.72 billion, slightly below the average analyst forecast of $8.82 billion.

Earlier on Thursday, Weatherford International Ltd (WFT.N), the world’s fourth-largest oilfield services company, reported a first-quarter profit compared with a loss a year earlier, helped by higher revenue in the company’s North America segment. [ID:nL3E7FL0FX]

Schlumberger’s shares rose 1.4 percent to $89.09 per share on the New York Stock Exchange, bringing its gain so far this year to nearly 7 percent

A new boss for SOCAR trading Singapore April 13, 2011

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The trading arm of Azerbaijan’s state oil company SOCAR has hired industry veteran Anthony Poon as the head of its Singapore office after the departure of the unit’s managing director Victor Lim for personal reasons.

The management change comes as SOCAR Trading Singapore looks to grow its core crude oil trading business and expand its products trading activities. Poon began in his new role on Monday. SOCAR Trading Singapore currently employs 12 people, and it plans to add another eight staff by the end of the year, the spokesman said.

“We are hiring new crude, fuel oil, gas oil and naphtha traders, as well as operations staff,” he said. Poon had worked for Caltex in Singapore for around 30 years, last holding the position of head of the international crude trading department, where he was responsible for crude and derivatives trading. The Singapore office was set up in 2009 with the goal of selling greater volumes of Azeri light crude sourced from its parent company to Asian customers.

Commodity traders make final stand March 30, 2011

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A global push to damp down wild swings in oil and other commodity prices reached a pivotal point Monday as big traders mounted their last attack on a U.S. plan to limit the role of speculators.

Many of the world’s biggest commodity market participants such as U.S. agribusiness giant Cargill Inc are resisting new rules that would cap how many futures and related swaps contracts any one company can control.

The plan to impose “position limits”, which has been under debate since prices first surged to records in 2007 and 2008, is now reaching its culmination, with companies rushing to submit their views to the U.S. Commodity Futures Trading Commission by Monday’s deadline.

So far, most are reframing familiar complaints: Banks, traders and exchanges opposing the CFTC plan say it would make it harder for them to hedge risk, and that it would reduce liquidity and increase costs for consumers. If the proposed rules are adopted with no change, “there is a substantial risk that they would undermine the efficiency of the markets for hedgers, by reducing liquidity and disrupting markets which currently function well”, Linda Cutler, a Cargill vice president, said in a letter to the agency.

But at a time when oil, grain and metal prices have again shot up, some reaching new heights, consumers too are looking for some regulatory relief. Politicians are stepping up pressure for action.

“The banks think this rule is too strong. Commercial end users, consumers, unions … think it’s far too weak,” Michael Greenberger, a University of Maryland law professor and former senior CFTC staffer, told Reuters Insider.
“As the American public starts suffering from $4 a gallon gasoline … the issue becomes more visible, the debate between the consumer and the big banks is more highlighted,” he said.

From Chicago and New York to London and Paris, the commodities markets influence prices for energy, metals, food and other products that hit consumers in areas such as the gas pump and the kitchen table, and so are politically volatile.

The CFTC polices the markets and is under orders from Congress to address perceptions that speculators periodically drive sharp swings in commodity prices that hurt consumers and producers. The CFTC plan would apply to exchange-traded futures and related over-the-counter swaps in 28 energy, metals and agricultural markets.

A 60-day period for public comment on it ends Monday. The CFTC must next read the comments and decide whether to change the proposal. Its five commissioners must then vote. Support for the plan is uncertain within the CFTC. The agency’s chairman, Gary Gensler, may have trouble mustering the three votes needed to finalize it. A final vote may not come for some time.

The “position limits” fight comes as regulators worldwide are working to draw up and implement hundreds of new rules for banks and markets following the 2007-2009 financial crisis, which unleashed a wave of reform efforts.

France favors a crackdown on commodity market speculation in its role as 2011 chair of the Group of 20 major economies. French officials blame speculation for worsening a surge in food prices last year amid fears that such swings fuel political unrest, particularly in the developing world.

“While the Europeans, and particularly the French, share CFTC Chairman Gensler’s concern about commodity prices, there is some skepticism among EU regulators that hard position limits are the right answer,” said Joseph Engelhard, a policy analyst at advisory firm Capital Alpha Partners. “The U.S. hard position limit approach leaves open the possibility that the regulators might overshoot their target levels and actually increase volatility.”

Although it is meant primarily to limit holdings by the funds and investors who have diversified into commodities over the past decade, the CFTC’s plan threatens business models that have generated profits for years for some of the financial world’s biggest players.

The market leaders include firms such as Goldman Sachs and JP Morgan Chase & Co. U.S. banks took in $5.5 billion in revenues trading in commodity markets last year, versus a record $11 billion in 2009, the U.S. Office of the Comptroller of the Currency said.

The 2010 figures represented just under 10 percent of the industry’s trading revenues. The decline from 2009 was due largely to decreased volatility and reduced hedging, officials have said, but also reflected less risk-taking by the banks.

Traders argue there is no evidence that speculators inflate prices, and say curbs could make prices more volatile. The CFTC’s economists have not found a causal link between speculation and price volatility, with one study showing commodity index traders are not causing price volatility, but may actually be helping to reduce it.

The agency’s effort was mandated by Congress in the Dodd-Frank financial regulation reforms made law in July 2010. But as in many other parts of that sprawling legislation, Congress left it up to regulators to hammer out the details.

“We challenge the fundamental premise upon which the CFTC argues that it has authority to impose position limits under Dodd-Frank,” said the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association, both industry groups, in a letter to the CFTC. “The proposed rules do not set forth why the proposed limits are necessary or appropriate.”

Earlier this month, Democratic Senator Maria Cantwell urged the CFTC to crack down on oil speculation that she said was likely contributing to recent gas price spikes. In a letter to Gensler, Cantwell and 11 other senators urged him to use his Dodd-Frank authority against “excessive speculation”.

“While oil speculators on Wall Street may be profiting from Middle East turmoil … families and businesses on Main Street are footing the bill at the gas pump,” Cantwell said in a statement on Friday.