The U.S. futures regulator on Tuesday charged oil trader Arcadia and two senior traders with artificially driving up crude oil prices three years ago, one of its toughest attacks yet on market manipulation.
Traders at Parnon Energy and Arcadia Energy, both owned by Norwegian shipping magnate John Fredriksen, are accused of carrying out a cross-market trading scheme between January and April of 2008 involving the accumulation and sell-off of a substantial position in physical crude oil to manipulate futures prices, it said in the complaint.
The Commodity Futures Trading Commission said James Dyer and Nick Wildgoose — former senior traders at oil major BP — directed the manipulative trading scheme, which it said yielded more than $50 million in unlawful profits.
Neither Arcadia nor Wildgoose or Dyer were immediately available for comment.
The measures stem from trading activities related to the interplay between physical oil storage held in Cushing, Oklahoma, the delivery point for the U.S. benchmark futures contract, and the derivatives market.
The traders executed a manipulative strategy by "amass(ed) a sufficient quantity of physical WTI to be delivered the next month at Cushing to dominate and control WTI supply even though they had no commercial need for crude oil," it said.
It said the traders aborted the scheme in April 2008 after learning of the CFTC investigation.
Volatility in commodity prices has renewed calls for the futures regulator to crack down on speculators in oil markets, with some lawmakers calling on the commission to immediately impose position limits.
Parnon, headquartered in Oklahoma, owns at least 3 million barrels of storage facilities at NYMEX crude delivery point Cushing. London-based Arcadia is a major global oil trading firm, which typically markets about 800,000 barrels a day of crude and product around the world.
Both are controlled by Fredriksen's Farahead Holdings, based in Cyprus. Fredriksen also controls one of the world's leading oil tanker companies, Norway's Frontline.
Arcadia has been implicated in oil squeeze plays in the past. In 2000, US independent refiner Tosco filed a New York lawsuit alleging that, together with other conspirators, Arcadia had colluded to control a large trunk of the physical Brent crude markup prices. Arcadia settled the lawsuit out of court for an undisclosed sum.
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