Thread: U.S. oil probes focusing on price manipulation

NEW YORK (Reuters) - A U.S. regulatory probe into potential oil-market trading abuses is focusing on possible short-term manipulation of benchmark crude prices and the use of information related to important oil storage tanks to influence prices, the Wall Street Journal reported on Friday.

The report comes a day after the Commodity Futures Trading Commission, under pressure from U.S. lawmakers to crack down on speculators they blame for pushing energy prices to record highs, said it would step up market surveillance.

The CFTC announced a nationwide investigation into energy trading last December, but is in fact pursuing several oil investigations, many of which relate to one another, the Wall Street Journal reported, citing people familiar with enforcement priorities of the agency.

It has expanded its probe into alleged short-term manipulation of crude-oil prices via a widely used price-reporting system run by Platts, a unit of McGraw-Hill Cos, the newspaper reported.

The probes appear to focus on gambits well known by traders in the opaque physical oil market, where trading a small volume of cash crude or gasoline during a short period when benchmark prices are set can yield big profits on derivatives positions.

Oil traders say that these kind of leveraged trading plays -- which are generally not illegal -- were more common prior to the Enron melt-down and the California power trading scandal that triggered increased scrutiny of world energy markets earlier this decade, but rarely had a lasting effect on prices.

However traders and analysts believe that increased investment from pension and other funds into commodities markets is partly responsible for causing prices to quadruple since 2004, with U.S. crude hitting a record high of $135.09 a barrel last week after rising by more than 40 percent this year alone.

The Journal quoted CFTC enforcement chief Gregory Mocek as saying the agency has about 60 manipulation investigations open in various commodity markets.

On Thursday the CFTC said it would expand its oversight of energy trading by tracking index funds, and had reached an agreement with the U.K.'s Financial Services Authority and ICE Futures Europe to share information.

WINDOW TRADE, STORAGE TANKS

One suspicion, the newspaper said, is that energy companies and traders have at times issued a flood of orders during the trading "window" used by Platts to determine its reported prices for physical oil transactions, then used the potentially distorted prices to make profits in other markets.

According to the Journal, Platts has said its system has safeguards to protect against manipulation. Subpoenas on the matter have gone out in several stages, the report cited people familiar with the cases as saying.

A Platts spokesman was not immediately available to comment.

The Journal cited people familiar with the matter as saying the agency has also been questioning traders about similar activity in the jet-fuel market.

Another area of concern for CFTC regulators is whether the owners of crude-oil storage tanks use their knowledge to make bets on oil-futures markets.

In theory, the owner of a tank could issue misleading information about the tanks being full or empty, leaving the wrong impression about whether oil is in plentiful supply. Then they could make trades to profit on the misunderstanding.

Regulators have long been wary of allowing any one company to gain too much control over storage tanks in Cushing, Oklahoma, the delivery point for the New York Mercantile Exchange's light, sweet crude oil contract, the world's main benchmark.

Government regulators forced BP to sell the Cushing storage assets of ARCO before allowing it to buy the U.S. company in 2001. BP is no longer the biggest tank holder at Cushing.

(Reporting by Steve James; Editing by Jonathan Leff and Michael Urquhart)

http://www.reuters.com/article/newsOne/ ... =0&sp=true

I heard the price of a barrel of oil fell $4.00 yesterday in response to this news.

What does that tell you? Why would the price of oil drop in reaction to an investigation?

W

Congress does their dog and pony . Drags the Big oil Ceo's in front of the house , few questions and it's over with.
We the people aren't that stupid . We know bout Cheneys private oil policy made with these men during BushCo's first term . Middle men every where now , think "They" call them "Speculators" . They drive the market and the price making "All" the Big oil people very happy . As always the people are made fools of by the very officials we vote (not me) into office !
if the wind blows , oil goes up . If it doesn't blow , oil goes up .

I caught an interview of a guy named Greenberger that used to work for Clinton administration (or wash it Bush I?), anyway, he was a former Director or Deputy Director of SEC or a related agency ... he said, he estimated that about 25% of the current cost of gas delivered at the pump was due to speculation [brought about by gradual deregulation] alone.

Of course they are manipulating it just like they are with food. When you slow production and the demand rises, price naturally goes up. Oil is abiotic meaning that it continues to be reproduced inside the earth.

$5.19 a gallon for Diesel here in SoCal.
Speculators, dependence on foreign oil and Liberal idiots in Washington that want everyone to drive a Toyota Prius are to blame. There is no way in heck I am going to drive one of those clown cars on a Southern California freeway.


* No offense intended for all that own a Prius *

Originally Posted by PhredE

I caught an interview of a guy named Greenberger that used to work for Clinton administration (or wash it Bush I?), anyway, he was a former Director or Deputy Director of SEC or a related agency ... he said, he estimated that about 25% of the current cost of gas delivered at the pump was due to speculation [brought about by gradual deregulation] alone.

Suppose there will be a Class Action Suit and we can get a rebate!

Originally Posted by WorriedAmerican

Originally Posted by PhredE

I caught an interview of a guy named Greenberger that used to work for Clinton administration (or wash it Bush I?), anyway, he was a former Director or Deputy Director of SEC or a related agency ... he said, he estimated that about 25% of the current cost of gas delivered at the pump was due to speculation [brought about by gradual deregulation] alone.

Suppose there will be a Class Action Suit and we can get a rebate!

I hope so, anybody know how to get one going? I have said for a long time that I don't think it is mere coincidence that before having two oil men in the white house, gas was about a buck a gallon, 8 years later we are flirting with 5. My ex husbands uncle works for oil companies and in '97 or '98 he told me the goal was 5 bucks a gallon. I find this whole thing suspicious. If a connection is found, I say criminal charges. From my current in-laws across the big pond, They are saying the international community is going to go for the jugular, especially the countries hit hardest by the oil prices.