* UK FSA's hostility to tighter trading limits unchanged
* Believes price volatility not primarily due to speculation
* Oil industry almost universally opposed to trading curbs
By Christopher Johnson and David Sheppard
LONDON, Aug 6 (Reuters) - The UK's financial watchdog looks likely to resist moves towards tighter regulation on commodity markets if a meeting it held with oil industry representatives is any guide, industry sources said on Thursday.
The UK Financial Services Authority held a private meeting on Wednesday with around 30 oil industry participants in London to discuss market transparency and regulation.
The London meeting coincided with hearings in Washington by the U.S. regulator, the Commodity Futures Trading Commission (CFTC), which are likely to result in tighter rules on derivatives and new limits on trading positions in U.S. markets.
The UK regulator issued no statement after the three-hour meeting and company officials attending the discussions declined immediate comment.
But a senior industry source who was represented at the gathering said on Thursday that the meeting had been almost uniformly opposed to any new trading limits.
"The conclusion of the FSA remains the same -- they are not convinced speculation has been a major influence in the long-term trend in commodity prices. The problem has been supply and demand," the industry source said.
"They are not convinced tightening position limits or removing hedging exemptions is really the way forward."
VOLATILITY
The CFTC has been holding its hearings in response to public concern that the increasing number of financial investors in commodity markets contributed to the spike in oil prices towards $150 a barrel last year and wild fluctuations in the price of other commodities.
CFTC Chairman Gary Gensler said on Wednesday the CFTC was "directed by statute" to impose limits as necessary to dampen or eliminate excessive speculation which may distort markets.
The spectre of tighter position limits has led some investment funds in the United States to argue there is a risk of creating excessive volatility in commodity markets by reducing the number of participants.
It was a view shared broadly by most of those at Wednesday's meeting in London with the FSA, and by the UK regulator itself, sources told Reuters.
British financial exchanges are largely self regulating with guidance and oversight offered by the FSA, rather than a rules-based system.
Both the Intercontinental Exchange (ICE) and the London Metal Exchange (LME), two of the world's largest commodity exchanges, have said they have no plans to change the way they regulate large positions on their UK-based markets.
But both the FSA and the oil trading community believe they need to be seen to be responding to the CFTC and its concerns.
Britain's opposition Conservative Party, which opinion polls suggest will win national elections due in less than a year, has promised to abolish the FSA and hand over its powers to the Bank of England to create a powerful super-regulator.
For more on commodity regulation from Reuters columnist John Kemp, please click here. (Editing by William Hardy)