There are many factors that affect oil prices. Fundamental factors such as global supply and demand and dollar moves are often cited. But many also say that traders play a big role in affecting oil prices fluctuations. No doubt, fundamentals are behind oil's long-term uptrend. And it is the dollar's weakness of the past few years that has supported the trend. But short term? Could traders' short covering be the reason behind oil's recent run-up to nearly $150 a barrel?

Perhaps, but that's behind us. Oil prices have retreated more than $20 dollars since. What caused that? Have the fundamentals changed? Some say global demand is bound to slow as the global economy weakens, but others say supply concerns due to geopolitical unrest are also growing. Has the dollar strengthened? A little, but then it declined right back Thursday after a housing report showed recovery is still far off. And what about traders?

Well, here's where The Wall Street Journal as well as Reuters bring an interesting theory. They say that the rise and fall in oil prices coincided with energy company SemGroup L.P.'s (mis)fortunes. SemGroup is a little known private company that transports, stores and distributes crude oil and refined products. It is also the parent of pipeline operator SemGroup Energy Partners L.P. (NADSAQ: SGLP). SemGroup L.P. filed for Chapter 11 bankruptcy protection Tuesday. According to the Journal, "Changes in its hedging strategies coincided with big moves in oil recently."

SemGroup's losses from oil trading amounted to $3.2 billion. How can a company lose so much in oil-trading when prices of oil just kept increasing, you ask? By covering short positions, of course. The company said the losses were incurred as part of a failed hedging strategy designed to protect its main physical oil trading business, but the loss seemed too great . Now new information reveals the company may have engaged in trading for profit, which is not in its mandate. Creditors have claimed fraud and unauthorized trading and have already filed a class action suit. The SEC is inquiring too. With $290 million losses caused by SemGroup's own former CEO, it is no wonder people are questioning what happened.

Regardless of how things progressed later, according to Reuters, "SemGroup was forced to take a $2.4 billion loss on July 16 after it transferred its NYMEX trading account to Barclays Plc." Given the time frame, the WSJ says some on the Street claim SemGroup's demise may have been partially responsible for the big drop in oil prices. In fact, SemGroup may have been first responsible also for the big oil rally, since as its long positions grew, so did oil prices. Then, during the transition of its portfolio to Barclays, oil prices plunged. Coincidence? At the very least, "SemGroup's rapid exit from the market removed a force for upward momentum."

Others claim that since it's unclear what Barclays did with the positions, the linkage isn't certain, especially since oil started dropping on Bernanke's comments July 15 and then on the inventories report the following day.

Either way, this whole story shines a bright light on how traders can affect oil prices and perhaps better explains why regulators have recently put short trading constraints on some banks. Meanwhile, the Commodity Futures Trading Commission continues its probe into price manipulation in the oil futures market and has recently charged a Dutch trading fund, Optiver Holding BV, with manipulating the price of crude, gasoline and heating-oil futures.

I have no doubt that more regulation is needed to help limit such manipulations. Of course, there will always be fraudsters and crooks, but I'd like to believe most traders are there to make an honest buck, not cause financial havoc. While bear markets are always a fertile ground for shorts and options traders, with clearer regulations and rules, we may be able to at least avoid some of the insane fluctuations and volatility we've witnessed in the market lately.