Rogue Trader Causes Oil Price Spike
Kurt Brouwer July 3rd, 2009
Rogue trader sends oil to year-high on $10m gamble (Times Online, July 3, 2009, Susan Thompson and Miles Costello)
PVM Oil Futures, a London-based division of the world’s biggest broker of over-the-counter derivatives, has lost almost $10 million (£6 million) after falling foul of a rogue trader.
…The rogue trades are widely believed to have caused global crude oil prices to spike to their highest level in more than eight months - a leap that traders and analysts had struggled to explain.
…Oil breached $73 a barrel during Asian trade on Tuesday, up by more than $1.50 a barrel in under half an hour at around 2am.
More than 16 million barrels of Brent crude oil traded in just over half an hour, according to Reuters exchange data, an unprecedented amount for a market that typically trades less than one million barrels before Europe opens.
The volume of crude traded during Asian trading was almost double the current daily output of Saudi Arabia, the world’s largest oil exporter…
Oil did plunge considerably after this came out and it hit $66.73 a barrel just two days later, so that suggests there is something to this.
Although I do not know about this case, my experience with securities firms leads me to a more cynical take on so-called rogue trading:
A rogue trader is a formerly ‘aggressive’ trader who lost a lot of money.
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