Oil Investors Pulled $39 Billion in Futures Contracts (Daniel Whitten)

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Sept. 10 (Bloomberg) -- Commodity index investors, blamed for record oil prices, sold $39 billion worth of oil futures between a July record and Sept. 2, causing crude to plunge, according to a report released today

The work by Michael Masters, president of the Masters Capital Management hedge fund, blames investors who buy and hold an index of commodities for driving prices to records and for their subsequent drop. It comes a day before the U.S. Commodity Futures Trading Commission is set to discuss its own study of energy trading with a congressional committee.

{xtypo_quote_right} The study "finally destroys the myth that there is some supply and demand relationship to what has happened to the run- up in oil prices," Dorgan, a North Dakota Democrat, told reporters today in Washington. "This is pure, unbridled, relentless speculation." {/xtypo_quote_right}

Masters testified three times before Congress this year, arguing that limits on traders would cut oil prices to $65 to $70 a barrel. He has been cited by lawmakers who introduced at least 20 measures to curb speculation. Congressional pressure on the CFTC to step up enforcement and restrict anonymous trades has pushed index traders out of their positions, Masters said.

"I don't think it's just coincidence that the money came out after the pressure was put on these folks," Masters, who wants legislation that would set limits on index commodity holdings, said in an interview.

Crude oil futures surged to a record $147.27 on July 11, an increase of 53 percent for the year, on the New York Mercantile Exchange, then fell 26 percent to $109.71 on Sept. 2. Oil fell $1.24, or 1.2 percent, to $102.02 today on the Nymex.