Letter: Market pitfalls

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The Independent Culture
Sir: The article about commodity trading by Stefan Bernstein (24 June) is potentially dangerous for small private investors.

First, anyone approaching Liffe with the aim of trading crude oil would risk open derision, given that the only exchange trading trade oil futures in Europe is the International Petroleum Exchange.

If this did not deter the small investor, the second shock might be finding out about the sums of money involved. The author uses a value of pounds 100 a contract as an example. This figure is misleading. In fact at current oil prices, a single deal would be worth $14,000.

Third, the author gives examples of information that a small investor might have in order to predict future prices. It is hardly likely that many, if any, private individuals would have inside knowledge about - using his example - huge oil deposits in Antarctica before the rest of the marketplace. The oil market is very open and rumours of big finds are normally common knowledge among all the participants.

The energy futures market is a highly professional industry. The people involved are highly skilled and experienced. While not wishing to put off private investors, I would advise caution and some in-depth research before plunging into the market.

SEANA LANIGAN

Assistant Vice-President, Market Services

International Petroleum Exchange

London E1

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