CFTC Charges Three Firms with Oil Price Manipulation

CFTC Charges Three Firms with Oil Price Manipulation By Alistair Barr, MarketWatch

SAN FRANCISCO -- A "manipulative" scheme that made unlawful profits on the price of crude oil was flagged in a complaint Tuesday by the Commodity Futures Trading Commission, a sign that the regulator is cracking down on potential speculation in energy markets.

The CFTC said it filed a civil enforcement action against Parnon Energy, Arcadia Petroleum of the United Kingdom, and Arcadia Energy of Switzerland in the U.S. District Court for the Southern District of New York.

Also charged were James Dyer of Australia and Nicholas Wildgoose of California for unlawfully manipulating and attempting to manipulate crude-futures prices on the New York Mercantile Exchange from January to April 2008.

The long-awaited $9 billion stock offering from AIG and the U.S. Treasury is on track to price late Tuesday despite recent market weakness. Randall Smith has details.

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The defendants allegedly made at least $50 million by cornering the supply of West Texas Intermediate light sweet crude at Cushing, Okla., the regulator alleged in its complaint. The pipeline hub there is the key point at which all crude futures are priced for trading on Nymex.

"Defendants conducted a manipulative cycle, driving the price of WTI to artificial highs and then back down, to make unlawful profits," the commission said in a statement.

The allegations come as the barrel's price has surged well above $100 in recent months. This month, crude prices slumped after CME Group (CME), the operator of Nymex, increased margin requirements for trading crude-futures contracts.

The last time crude spiked above $100 a barrel was in early 2008. At that time, speculation was at least partly blamed for the increases. When the global financial crisis hit in the second half of that year, crude slumped below $40 a barrel.

Parnon Energy is the trading and marketing arm of Parnon Holdings, which the CFTC said operates as a "common enterprise" with Arcadia Petroleum, based in London.

The affiliates traded West Texas Intermediate through a collective "WTI book" run by Dyer and Wildgoose, according to the CFTC's complaint.

Phone calls to Parnon's U.S. offices were referred to Colin Hurley, chief financial officer of Arcadia Petroleum in London. Calls to Hurley's phone weren't picked up.

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