Price discovery of crude cannot be unregulated: Reddy

Riyadh, (Saudi Arabia) : Minister of Petroleum S Jaipal Reddy has emphasised the need for improving understanding of inter-linkages between the physical and financial markets to address the issues of price volatility and price discovery.

Speaking at the International Energy Forum (IEF) Extraordinary Ministerial meeting at Riyadh (Saudi Arabia) Wednesday, he added that oil price discovery cannot be left entirely unregulated.

He underlined that unregulated over-the-Counter (OTC) transactions and trading in ?paper barrels?, along with unbridled speculation activity were to blame for unprecedented oil price rise in 2008.

The Minister also called for strengthening current regulatory framework for commodity futures and derivatives markets. He said, ?We need to consider establishing position limits and moving OTC activity on to regulated exchanges.

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 also extended Indian support for further initiatives by IEF and other international organizations, for putting in place suitable regulatory mechanisms, to prevent a recurrence of 2008.