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Rogue Trader Gets Burnt in the Brent Oil Market

Jack H Barnes's picture




 

Oil Tanker on FireMerry olde England, where boys will be boys.  In the last couple of months we have had a rash of piker traders turning Rogue.  Granted, none have been as large as La Gerbil err Kerviel. However in this illiquid market era, it appears that any single trader can move the offical markets now.

The startling spike in oil prices to their highest level this year on Tuesday was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m (€7m) of losses for his company.

PVM Oil Associates, the world’s largest over-the-counter oil brokerage, said on Thursday it had been the “victim of unauthorised trading”. The privately owned company said that as a result of the unauthorised trades it had been forced to close substantial volumes of futures contracts at a loss.

...

Prices rose in one hour from $71 to $73.5, the highest level for the year, according to Reuters data. In total, futures contracts for more than 16m barrels of oil changed hands in that hour – equivalent to double the daily production of Saudi Arabia, the world’s largest oil producer, and far more than the traditional 500,000 barrels for that time of the day.

Traders said the broker implicated had allegedly accounted for at least half of the unusual activity, with the rest the result of others chasing the rally. Oil prices on Thursday fell to $66.5 a barrel, down almost 10 per cent from Tuesday’s peak.

The Financial Times has identified the PVM broker as Steve Perkins. PVM declined to comment and Mr Perkins could not be reached. Fellow traders said Mr Perkins was considered an experienced broker, well-regarded in the market.

This is the second episode of rogue trading in the oil market this year. In May, an oil trader at Morgan Stanley was banned by the City watchdog after he hid from his bosses potential losses on trades made under the influence of alcohol.

Oil Prices only swing by 10% in two days via an experienced trader turning Rogue, and there is almost zero news on this.  Interesting.

link to FT article

video from FT on the trade

 

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Thu, 07/23/2009 - 15:33 | 13142 gridlocked
gridlocked's picture

Wholesale gasoline just under $1.92/gallon

It had peaked at $1.94 before the recent

downturn and now its back. Did I miss something"

Has there been some huge demand increase?

A huge supply cut off? On the contrary multi nationals

have begun selling off some of their stored $40

tanker oil.  I guess this doesn't actually affect

pricing because it was already sold but won't it

show lower demand if its displacing current oil?

 

Up, up and away.

Fri, 07/17/2009 - 16:48 | 9008 gridlocked
gridlocked's picture

Wholesale Gasoline hit a low last week of 1.61-1.62 and now

its just under 1.77 a gallon and headed up.

Prices barely move on actual figures of higher supply or

lower demand but a string of stories speculating that the

price  will go higher makes the price jump.

 

I hope Gensler (CFTC) revokes the exemptions given GS

and a few others.

Fri, 07/17/2009 - 12:28 | 8722 Anonymous
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Thu, 07/16/2009 - 20:55 | 8328 Joe Sichs Pach
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Who then continues to bid this up?  These supply/demand reports are published and available to all without any real covering up by the (former) MSM or otherwise - do the reports even account for the literal shiploads held offshore?

Beyond the occassional rogue trader, trading programs and pit traders, who are you guessing is behind it?  Somebody's always going to point a finger at GS but are there NO other market participants (single or combined) who can match or counter them?

Oil goes up, gas costs more, I have less money, anger ensues.

Wed, 07/15/2009 - 13:32 | 7328 Anonymous
Anonymous's picture

Prices are heading up once again despite no signs of increased demand. Bloomberg keeps rerunning different versions of Morgan Stanley saying that oil will reach $85 this year.

Supply at a 10 year high and demand at a 10 year low. It is beyond belief.

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