CME raises crude futures margins 4th time since Feb

CME Group Inc, the world's largest commodities exchange, raised the margin call for crude futures for the fourth time since February as price volatility soars.

Margins will climb by 25% as of the close of business on May 10, boosting the cost of holding positions for hedgers and speculators, a factor some traders said helped bring oil prices down by as much as 2% on Tuesday following a USD 5 a barrel spike a day earlier.

In a two-step hike over six trading sessions in late February and early March, CME Group had already raised the margins on US crude by a cumulative 33%, increasing them again on April 15. The higher margin requirements were linked to increased volatility as civil war broke out in Libya, cutting the country's crude exports.

The cumulative increase in margins on US crude benchmark West Texas Intermediate positions since February is 67%, from USD 3,750 to USD 6,250 per contract.

Initial margins started 2009 at more than USD 9,000 per contract, after prices slumped from records near USD 150 a year earlier to less than USD 40 a barrel, and then shrank over the course of the year as volatility decreased. They are now at USD 8,438.

The latest move comes after a frenzied week of oil trading that saw US crude prices fall from over USD 114 a barrel -- the highest level since 2008 -- to USD 94 a barrel.

That drop was part of a wider commodities sell-off last week, spurred in part by margin increases of 84% in silver over the past two weeks.

US crude prices, which rebounded from last week's rout to settle up USD 5.37 at USD 102.55 a barrel on Monday, traded down following news of the margin increase, falling USD 1.37 to USD 114.53 a barrel at 0307 GMT.

CME, parent of the Chicago Board of Trade, said on its website that it had hiked margins for crude oil futures on the New York Mercantile Exchange by USD 1,250 per contract. With open interest in the contract topping 1.65 million lots last week, that would amount to an over USD 2 billion increase in total.

Margins are deposits paid by investors in futures markets, where full payment is made when contracts mature, to an exchange or clearing house to cover the risk of default by that investor and typically are based on the largest most-likely daily market move.

Margins can be used as a tool to curb speculative trading activity, particularly "hot money," by reducing the number of positions a party can hold leveraging a particular amount of money.

CME also increased Brent financial futures margins by 23.8%, while RBOB gasoline margins were hiked by 21.7%.

The amounts are in US dollars per contract for speculators: