Turbulent conditions have made the crude oil market vulnerable to illegal activity, US regulators on Tuesday warned as they imposed limits on the speculative positions on some trades made on overseas exchanges.

Walter Lukken, acting chairman of the Commodity Futures Trading Commission, said the environment was "ripe for those wanting to illegally manipulate the markets" and that the agency was "taking constructive steps . . . to make sure there is not excessive speculation driving the markets".

His comments to a joint Senate hearing came as US legislators become more alarmed about surging commodity prices and the role that speculators might be playing in driving record oil prices. Legislators have been pushing for tighter scrutiny of activity by speculators.

The CFTC's decision to impose position and accountability limits on one crude oil contract traded on London's ICE Futures Europe exchange - which is linked to the benchmark US West Texas Intermediate contract - would bring oversight of US traders' behaviour on overseas exchanges into line with limits on domestic markets.

Mr Lukken said: "The CFTC will also require other foreign exchanges that seek such direct access to provide the CFTC with comparable large trader reports and to impose comparable position and accountability limits for any products linked with US-regulated futures contracts."

The futures regulator, which has repeatedly said prices are being determined by fundamental supply and demand factors, appears to be stepping up its focus on the potential impact of speculators and commodity index traders - though some market participants say this reflects the CFTC's attempt to avoid Congress imposing tougher legislation rather than a reversal of its policy.

Mr Lukken acknowledged the widespread concerns about the surge of money flowing into the futures markets from institutional investors via commodity indices. He said there were "concerns that people are trying to evade position limits" through Wall Street "swap" dealers that handle much of this type of investment.

The CFTC is collecting more detailed information on index funds and other transactions being conducted through swap dealers and plans to provide recommendations to lawmakers in September.

But the regulator, which has recently announced a series of initiatives aimed at improving its scrutiny - inc-luding a nationwide crude oil investigation - conceded that it needed immediate ad-ditional resources and asked for more funding and staff.