US watchdog probes claims that supply figures are fixed

The US Energy Information Administration's Wednesday oil inventory data are one of the most closely watched indicators, and generally set the tone for the oil price during the week.

But they are based on companies' own reports, and regulators fear they may be reporting inventory levels that benefit their own trading positions but that may not be accurate. Unexpected drops in inventories levels can send the oil price on sharp price spikes.

According to the Wall Street Journal, the Commodity Futures Trading Commission has started taking evidence about inventory reporting. It is not clear whether the regulators have specific energy firms in their sights. The CFTC is also expected to investigate whether companies conduct some oil sales and purchases solely to influence short-term pricing on futures markets.

Speculators have come under the spotlight since the oil price started to soar and politicians sought scapegoats.

"These investigative efforts are ongoing. Ensuring the integrity of the futures markets is critical, particularly in the energy sector given the impact energy prices have on all consumers," an agency spokeswoman said.

It is illegal to report false data to the EIA, and the CFTC will also be looking at how much the agency screens the reports it receives. The watchdog will examine certain periods in the past year it considers suspicious.

It is said to be looking a rapid shift in the structure of oil markets that occurred in July 2007 when prices changed in a way that was profitable for traders who may have had close knowledge of continuing and rapid drain-off in oil inventories.

The EIA doesn't do physical inventory checks to audit the accuracy of the reported numbers but does cross-reference the data against other supply-and-demand figures.

The CFTC itself has been under fire from a group of US senators, who allege that the CFTC knowingly included "seriously flawed" data in a recent inter-agency task-force report on oil prices.