Oil brokerage loses $10M on rogue trades

London-based PVM Oil Associates, the world’s biggest over-the-counter oil brokerage, says it lost nearly $10 million the week ending July 3 because of unauthorized trades that caused a temporary spike in Brent crude markets.

PVM said in a statement July 2 that it was investigating the trades, which drove up the price of Brent futures by more than $2 in one hour June 30 London time. It did not identify the trader involved in the transactions.

ICE Futures Europe, the exchange which handled the trades, said July 3 that such incidents would be investigated as a matter of course, but declined to comment specifically on this case.

The Financial Times reported that futures contracts for 16 million barrels of oil changed hands in one hour, compared to a typical volume of 500,000 barrels.

PVM said the trading had been reported to the Financial Services Authority, but the government agency declined to say on July 3 whether it was investigating.

David Peniket, president of ICE Futures Europe, said unusual trading activity is always investigated.

“There are a range of procedures that are followed to look at trading patterns, price movement and levels of activity,” he said.

“Where appropriate, action will be taken,” Peniket added.

A statement issued by PVM’s managing director, Robin Bieber, said that “as a result of a series of unauthorized trades, substantial volumes of futures contracts were held by PVM.”

“When this was discovered, the positions were closed in an orderly fashion. PVM suffered a loss totaling a little under $10 million.”

—The Associated Press