LONDON: Hedge funds accelerated the oil price sell-off this month and prices will stay volatile this year, Credit Agricole CIB global head of commodities and energy said at the Reuters Global Energy Summit on Monday.
Oil prices have fallen sharply by around 20 percent from 19-month highs above $87 a barrel in early May and were near $70 a barrel on Monday.
The expiring U.S. crude contract traded in a more than $7 range last Thursday, ranking it in the top 20 most volatile sessions since 1983.
"When you look at the sell-off in prices in the oil market in the last couple of weeks, it's clear that there has been significant hedge fund involvement," said Martin Fraenkel, pointing to their growing market role and tendency to liquidate positions quickly during a price swing.
But while volatilty will remain a market feature, overall prices for Brent and U.S. crude are set to rise only slightly to around $75 a barrel by year end, he said.
"Prices are not going to be dramatically different from where they are now (at the end of 2010) but we will see lower and higher inbetween," he said.
The current oil market structure known as contango -- where front-month prices are depressed relative to more distant contracts -- is also set to remain intact in the short term, he said.
This put Fraenkel at odds with Goldman Sachs' global head of commodities research Jeffrey Currie who last week said the reverse structure, backwardation, was possible by the end of the summer.
Other commodities such as copper presented a buying opportunity, Fraenkel said, but the outlook for natural gas was uncertain.
