The world's largest broker for over-the-counter oil derivatives has admitted a “rogue trader” created a spike in oil prices last month. Volatility in oil prices has often been blamed on speculators although evidence is rarely made public.
But on Friday, London-based PVM Oil Associates confirmed that a long-standing, well-established futures trader, unhappy with his bonus, Steve Perkins, made unauthorised trades for 16 million barrels in the Brent oil market, resulting in prices rising from $US71 to $US73.50 a barrel in just one hour.
The order was double the daily production of Saudi Arabia and far in excess of the average daily trading of 500,000 barrels.
The spike was so pronounced that some traders believed they must have been caused by a geopolitical event, with unrest in Nigeria originally among the explanations.
The broker’s alarm systems detected the unusual trading pattern and it had to dump the 9000 futures just hours later.
The trades led to a loss of £6 million, which was more than PVM’s profit last year of £5.9 million. Brokerages such as PMV place orders on behalf of large banks and hedge funds.
As well as making the the unauthorised trades public, PMV has reported the matter to the Financial Services Authority and the ICE, which is where much European trade takes place.
http://www.nbr.co.nz/article/rogue-trader-unmasked-and-blamed-junes-oil-price-spike-104829
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