US alleges 2008 oil trade fixing

2011-05-25 10:17

Washington - US authorities on Tuesday accused three companies linked to Norway-born Cypriot shipping and drilling tycoon John Fredriksen of manipulating oil trading on the NYMEX and ICE exchanges in 2008.

The Commodity Futures Trading Commission (CFTC) said it had filed a civil suit against three affiliated companies - Parnon Energy of California, Arcadia Petroleum of Britain, and Arcadia Energy (Suisse) SA of Switzerland - for collaborating to manipulate oil prices in a scheme that netted them $50m in profits.

Also named in the accusation were traders James Dyer of Australia and Nicholas Wildgoose of the United States.

All three of the accused companies are wholly owned subsidiaries of Farahead Holdings, with London-based Arcadia Petroleum the main operating firm in the trading ring.

Farahead is a part of the sprawling shipping, oil drilling and fish farming conglomerate of Fredriksen, the London-based Cypriot citizen who ranked number 72 on this year's Forbes billionaires list with a fortune of $10.7bn.

Fredriksen was not named in the accusations.

The CFTC said that from late 2007 through April 2008, the three companies and the two traders sought to control already tight supplies of the benchmark West Texas Intermediate crude oil with physical purchases of millions of barrels "even though they did not have a commercial need for crude oil."

Tightening the supply of physical crude drove up their WTI futures and options contracts on the NYMEX and IntercontinentalExchange.

After taking profits in that way, the accused shorted WTI contracts and then quickly dumped their physical oil, pushing down the price and delivering more profits to the, the CFTC said.

"Pursuant to this manipulative cycle ... defendants realised profits from their WTI Derivatives trading that exceeded $50m."

The scheme took place at a time when global oil prices were soaring toward a peak near $150 a barrel on a speculative frenzy that collapsed, driving price down to nearly one fifth of the high.

The CFTC said the traders reported to the unnamed chief executive and head trader of Arcadia Petroleum, who "performed the functions of CEO for Parnon and Arcadia Suisse."

It also said they halted the scheme when they discovered they were being investigated by the CFTC.