Thursday, May 26, 2011

Duh, CFTC Charges Traders with Trading

I am hearing from a variety of sources that the CFTC is becoming extremely aggressive over a broad spectrum of issues. Expect exponential growth in headline grabbing charges from this agency.

The most recent example, announced earlier this week, comes in the form of CFTC charges that a trading house and two individuals with manipulating oil prices in 2008. The charge is  the second oil manipulation case the CFTC has filed since launching a “nationwide crude oil investigation” three years ago.

Specifically, the CFTC alleges that Parnon Energy, a US oil trader, together with its Swiss and UK affiliates Arcadia Energy and Arcadia Petroleum, made more than $50m from oil trading in January and March 2008.

The CFTC alleged that two traders at the company amassed large positions in the physical market at Cushing, the pipeline hub in Oklahoma that serves as the delivery point for the WTI futures contract.

The CFTC complaint alleges that by mid-January the traders had accumulated 4.6m barrels of physical oil, or two-thirds of oil available for delivery against the February WTI futures contract. In March they bought 6.3m barrels, equal to 84 per cent of oil available for delivery against the April contract.

The buying created the impression of a shortage and pushed up the price of WTI futures on the New York Mercantile Exchange. The traders also bought large amounts of futures that would profit from a price rise.

“They wanted to lull market participants into believing that supply would remain tight,” the CFTC said. “They knew that as long as the market believed that supply was tight and getting even tighter, there would be upward pressure on the prices of WTI for February delivery relative to March delivery, which was their goal.”

So what was the supposed impact of this "manipulation", according to the CFTC the traders were able to move the price by $1.  Some manipulation. During the same period the market price for oil rose $20  per barrel.

Earth to CFTC, the oil market is a huge market, there are traders globally attempting to position trades in all sorts of ways. There is no way this trade would have worked without a strong oil market. These guys would have been crushed. Bottom line, they got in ahead of a major move. Beginning and end of story.

Here's a tip for the CFTC. There's huge market manipulation going on from the guys working out of 20th Street and Constitution Avenue, NW in Washington DC.


  1. Maybe they can give an update on the Silver market investigation that's been going on for 3 years?

    They can always call Abby in as an expert witness, she has no peers when it comes to the Silver market.


  2. Great Scott!!! They bought and sold assets? I mean the nerve of these people.

    If it weren't for the fact that QE2 is going to end June 30th (presumably), I would be sitting back waiting for the government price controls to kick in.

  3. " . . .I would be sitting back waiting for the government price controls to kick in. "

    And I would get an electric vehicle so fast it would make your head spin. Price controls = waiting in very loooOOOOOOOOOOOOOOoooooong lines for gas. It causes artificial scarcity. if the Obama Admin truly wanted people to switch to electric vehicles, that would sure be one way to start doing it.

  4. Well I agree they were manipulating the market, but LMAO at the CTFC getting all ruffled over $50M. When compared to the $billion+ scandals running around $50M is loose change in the couch.