CFTC Charges Three Firms with Oil Price Manipulation

CFTC Charges Three Firms with Oil Price Manipulation By Alistair Barr, MarketWatch

SAN FRANCISCO -- A "manipulative" scheme that made unlawful profits on the price of crude oil was flagged in a complaint Tuesday by the Commodity Futures Trading Commission, a sign that the regulator is cracking down on potential speculation in energy markets.

The CFTC said it filed a civil enforcement action against Parnon Energy, Arcadia Petroleum of the United Kingdom, and Arcadia Energy of Switzerland in the U.S. District Court for the Southern District of New York.

Also charged were James Dyer of Australia and Nicholas Wildgoose of California for unlawfully manipulating and attempting to manipulate crude-futures prices on the New York Mercantile Exchange from January to April 2008.

The long-awaited $9 billion stock offering from AIG and the U.S. Treasury is on track to price late Tuesday despite recent market weakness. Randall Smith has details.

The defendants allegedly made at least $50 million by cornering the supply of West Texas Intermediate light sweet crude at Cushing, Okla., the regulator alleged in its complaint. The pipeline hub there is the key point at which all crude futures are priced for trading on Nymex.

"Defendants conducted a manipulative cycle, driving the price of WTI to artificial highs and then back down, to make unlawful profits," the commission said in a statement.

The allegations come as the barrel's price has surged well above $100 in recent months. This month, crude prices slumped after CME Group (CME), the operator of Nymex, increased margin requirements for trading crude-futures contracts.

The last time crude spiked above $100 a barrel was in early 2008. At that time, speculation was at least partly blamed for the increases. When the global financial crisis hit in the second half of that year, crude slumped below $40 a barrel.

Parnon Energy is the trading and marketing arm of Parnon Holdings, which the CFTC said operates as a "common enterprise" with Arcadia Petroleum, based in London.

The affiliates traded West Texas Intermediate through a collective "WTI book" run by Dyer and Wildgoose, according to the CFTC's complaint.

Phone calls to Parnon's U.S. offices were referred to Colin Hurley, chief financial officer of Arcadia Petroleum in London. Calls to Hurley's phone weren't picked up.

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Sure the've been charged but will the extra money I spent on gas be refunded to me? no!! our government is behind it all!!! yesterday the stock market fell over 500 pts. today the government released the new unemployement data, it was at 9.2% and fell to 9.1%, crude was around was starting to drop but is starting to climb again, thanks to our gov. for getting these new rates!!!! If new jobs have been created, where the hell are they!!! I'm ready to move to a different state if I have to..... Who makes up these unemployement #'s?? and how many new gov. jobs were created to come up with these f..ed up #'s that started wall street to climb again???? yesterday I told my wife we can start to put food back on the table again instead of all our money going into the gas tank.... today she told me I'm full of s..t just like the government!!!!!

August 05 2011 at 1:51 PM Report abuse rate up rate down Reply

string them up without their boots on

May 28 2011 at 7:27 PM Report abuse rate up rate down Reply

while these jerks manipulated the markrt it moved between 98 and 100a bbl ...big players.... 95vper cent of world oil is controlled vand owned by governments...they set the prices ... these guys just play the edges,,, don't worry tho....china is buying up most of the world production.... if our stupid govt. doesn;t stop making rules that prevent north american development... we haven't had a new refinery in 40 years/// we'll be begging china for oil some daqy

May 25 2011 at 10:04 PM Report abuse +1 rate up rate down Reply

Get these losers out of our country ! I am sick of them making money on the backs of Americans.

May 25 2011 at 9:36 PM Report abuse +3 rate up rate down Reply
Benjamin Willis

You guys are very wise. Its the 5% margins. Its gas prices that will not let the US economy to grow. Its letting geo-corps not pay their fare share of taxes. Its offshoring all America industruties. Its bad trade agreements that hurt the poor and make refugee workers we call them illegal workers (Mexicans) etc... Its a corrupt Supreme Court put in place to undermine the will of the people, and give their masters the world. Its the people who think race is real. There is no races only men and women. Race science has hurt poor whites more then America blacks, think about it .

May 25 2011 at 7:44 PM Report abuse +5 rate up rate down Reply
1 reply to Benjamin Willis's comment

Corporations don't PAY taxes, Benjamin. They never have and never will. Instead, corporations COLLECT taxes from those who PAY the taxes. And those who PAY corporate taxes are a combination of shareholders, employees, and consumers. In other words, lower investment returns, less jobs/lower wages, and higher consumer prices. Is that what you seek?

May 25 2011 at 9:26 PM Report abuse rate up rate down Reply

Someone please explain to me how the Saudi's could be stopped from giving ten individuals a $100 milliom each to speculate the price of oil , obviously in their favor and then be caught in the act of what what would be deamed illegal??

May 25 2011 at 7:24 PM Report abuse +3 rate up rate down Reply

What took the CFTC so long to address something that has been going on for decades. They should also address the Margin requirement issue which is under the Exchange's aupices. I have been trying to get our Washington representatives to act on this issue for months now. The following is an excerpt from some recent commentary that I have made:
On 12/10/2010, I wrote a letter to Congressman Peter King and emailed a copy to Vice President Joe Biden a couple of months later. The letter was entitled: Crude, Our Enemies Greatest Weapon Against Us. This letter was an analysis on what was happening on the Crude Futures Market, and why. I presented specific calculations as to the cost to all Americans in buying power if Crude went over $100/barrel. And, of course,how to stop the mad speculation on the Future's exchange. Peter King acknowledged my letter but never pursued the matter with me any further. V.P.Joe Biden never answered my email. History has witnessed the ease by which the Future exchanges can be criminally manipulated (The Hunt manipulation of the Silver Market 1980),but the manipulation that we are now witnessing is the result of a flawed pricing mechanism being fueled by greed and incompetence. It seems that our elected officials in Washington lack the analytical competence to see the cause of the problem and ,therefore, lack the ability to solve it. Unfortunately,Washington has too many lawyers and not enough math and science majors who can do the math and have the ability to understand cause, and present postulates that are worthy of consideration and can actually solve problems. The cure to our present egregiously high Crude-prices is simple and also has nothing to do with supply and demand factors. The answer to the egregiously high crude prices which, it seems, our elected officials do not comprehend, is in the fact that Margin requirements on Crude contracts are set by the Commodity Exchange and not the Federal Reserve which sets the margin requirements on qualifying stocks and Bonds. The present Margin requirement on stocks is at 50% while Crude contracts can be purchased on 5% margin. A trader can speculate on 1000 barrels of Crude (1 contract)for around $6000. Is there any wonder why speculators can manipulate the Crude market as they have done? Buying frenzies created with erroneous perceptions created by the media through ignorance, and the speculators themselves to satisfy insatiable greed with complete lack of integrity. You don't have to be a genius to know that present Crude prices are already $40/barrel above where they should be and costing Americans 1.5 trillion/year more than they should be paying, 1.5 trillion dollars in buying power. And soon to be further exasperated by an inflation rate that could reach 10% because of the negative ancillary effects of very high energy costs. The answer to all of this speculative manipulation of the Crude Futures market is a 50% margin requirement on Crude contracts.It will stop the evil that is threatening the solvency of our nation. Crude prices will drop 25+ dollars/barrel in a week and maintenance-calls will force out the speculators that care only to satisfy their greed at the expense of ordinary people who have to work for a living. Most Americans can not afford $4+/gallon gasoline and heating oil and 10+% inflation created by Crude at its present price levels. The price of not addressing this matter quickly will surely result in an economic downturn that will equal or even surpass the Great Depression of the 1930s. I do not know what President Obama's investigation will reveal as to criminal manipulation,but I will not be surprised if it does uncover proof of such manipulation. But,hopefully they will discover what I already know: the problem is a 5% margin requirement on Crude contracts that has turned the commodity Futures market into a crap-game for greedy speculators and others who also profit from higher Crude prices.

May 25 2011 at 5:48 PM Report abuse +7 rate up rate down Reply
2 replies to croone22's comment

You are spot on sir!

May 25 2011 at 5:57 PM Report abuse +4 rate up rate down Reply
1 reply to bam2microa's comment

Thank you!

May 25 2011 at 9:09 PM Report abuse rate up rate down

Those who lack analytical competence are the ones unable to discern that speculative buyers of crude by definition must close out their long positions to profit, and are therefore also sellers of crude in the exact same proportion as they are buyers. Actually, this doesn't really take "analytical competence", but merely a keen sense of the obvious. Perhaps it is the lack of your very own keen sense of the obvious that persuaded King and Biden to ignore your letter (although I doubt they are any brighter).

May 25 2011 at 9:32 PM Report abuse -2 rate up rate down Reply
Kenneth O. Dameron

If DOJ can make the case, I say, lock them all up and impose financial penalties of 10 times the amount they illegally earned. While they are awaiting trial, jail them at Riker's Island in NYC.

May 25 2011 at 5:47 PM Report abuse +5 rate up rate down Reply

Correction: If you would like some interesting reading then google Michael W. Masters testimony to Congress, May 20, 2008. This guy is a Wall Street insider and whistleblower. I think you will enjoy the read.

May 25 2011 at 5:09 PM Report abuse +2 rate up rate down Reply

If you would like some interesting reading then google Michael W. Masters testimony to Congress, May 20, 2011. This guy is a Wall Street insider and whistleblower. I think you will enjoy the read.

May 25 2011 at 5:01 PM Report abuse +1 rate up rate down Reply