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Wednesday 24 September 2008
Investigation widens into unusual oil price rise
U.S. regulators have subpoenaed recent trading records from several Nymex traders as part of a widening investigation into the sharp rise in oil prices. PDF
U.S. regulators have subpoenaed recent trading records from several Nymex traders as part of a widening investigation into the sharp rise in oil prices.
The subpoenas are part of an examination announced by the Commodity Futures Trading Commission on Monday, soon after the price for an expiring futures contract on the Nymex surged in the last hour of trading, according to people briefed on the continuing investigation.
In that announcement, Walter Lukken, the agency’s acting chairman, said investigators were closely monitoring the price move, which came as the financial markets were struggling to recover from the upheaval of the previous week.
Later on Monday, Lukken was briefed on the episode by Craig Donohue, the chief executive of the CME Group, which owns the Nymex, according to people who were involved in those arrangements.
The investigation is aimed at detecting any attempt to illegally manipulate the settlement price for the Nymex crude oil futures contract for October delivery, said Stephen Obie, acting director of the commission’s enforcement division.
As part of its investigation, the enforcement staff can compel sworn testimony and demand the production of information concerning the crude oil markets, including recent trading by specific firms.
The crude oil contract for October delivery jumped as much as $25 a barrel — its highest one-day surge ever — before settling up 16 percent higher at $120.92. The more actively traded November contract rose just 6.4 percent, to $109.37 a barrel.
On Tuesday, the October contract was no longer trading, and the price on the November contract fell $2.76, or 2.5 percent, to $106.61 a barrel.
The price surge took place amid very light trading. Only about 41,000 contracts for October delivery traded hands, compared with a 15-day average volume of 280,000 contracts, according to Bloomberg data.
The jump immediately caused analysts and traders to suspect that one or more traders holding short positions — bets that oil prices would fall — were scrambling to cover their bets in a rising market.
“It looks like a classical corner,” said Robert McCullough, an independent energy expert.
Regulators filed charges in July against a Dutch trading company, Optiver Holding, and several executives and affiliates. That complaint accused the defendants of making more than a dozen separate attempts in March 2007 to manipulate three popular contracts traded on the Nymex, including the contract involved in the current investigation.
Optiver has denied the allegations, and the case is pending.
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Investigation widens into unusual oil price rise
By Diana B. Henriques
24 September 2008
U.S. regulators have subpoenaed recent trading records from several Nymex traders as part of a widening investigation into the sharp rise in oil prices.
The subpoenas are part of an examination announced by the Commodity Futures Trading Commission on Monday, soon after the price for an expiring futures contract on the Nymex surged in the last hour of trading, according to people briefed on the continuing investigation.
In that announcement, Walter Lukken, the agency’s acting chairman, said investigators were closely monitoring the price move, which came as the financial markets were struggling to recover from the upheaval of the previous week.
Later on Monday, Lukken was briefed on the episode by Craig Donohue, the chief executive of the CME Group, which owns the Nymex, according to people who were involved in those arrangements.
The investigation is aimed at detecting any attempt to illegally manipulate the settlement price for the Nymex crude oil futures contract for October delivery, said Stephen Obie, acting director of the commission’s enforcement division.
As part of its investigation, the enforcement staff can compel sworn testimony and demand the production of information concerning the crude oil markets, including recent trading by specific firms.
The crude oil contract for October delivery jumped as much as $25 a barrel — its highest one-day surge ever — before settling up 16 percent higher at $120.92. The more actively traded November contract rose just 6.4 percent, to $109.37 a barrel.
On Tuesday, the October contract was no longer trading, and the price on the November contract fell $2.76, or 2.5 percent, to $106.61 a barrel.
The price surge took place amid very light trading. Only about 41,000 contracts for October delivery traded hands, compared with a 15-day average volume of 280,000 contracts, according to Bloomberg data.
The jump immediately caused analysts and traders to suspect that one or more traders holding short positions — bets that oil prices would fall — were scrambling to cover their bets in a rising market.
“It looks like a classical corner,” said Robert McCullough, an independent energy expert.
Regulators filed charges in July against a Dutch trading company, Optiver Holding, and several executives and affiliates. That complaint accused the defendants of making more than a dozen separate attempts in March 2007 to manipulate three popular contracts traded on the Nymex, including the contract involved in the current investigation.
Optiver has denied the allegations, and the case is pending.
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