Rogue trader pushes up oil price

After the price of oil reached its highest level this year on Tuesday, it was revealed that the spike was due to the unauthorised activity of a London rogue trader, later identified as dealer Steve Perkins. The broker placed huge bets on the price of Brent crude in the early hours of Tuesday morning and after they went wrong cost his firm PVM Oil Associates - the world's biggest 'over the counter' oil brokerage - nearly $10m in losses.

Dealers on the volatile market had been mystified by a massive pick-up in trading activity on Tuesday morning that would usually have been explained only by a global event. The price of oil quickly jumped to $73.5 per barrel from $71, with contracts involving 16m barrels changing hands. However by Thursday, the oil price had retreated to $66.5 per barrel, a fall of nearly 10 per cent.

PVM said in a statement: "As a result of a series of unauthorised 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 totalling a little under US$10m." However there was some controversy over the timeline of events, with the US commodities regulator claiming it had not been informed for some time of the problem by the UK's Financial Services Authority.

WHAT THEY ARE SAYING:Douglas A McIntyre on 247WallSt.com: "The news makes it clear that even a small firm can move markets and that providing rules and watchdogs has severe limitations... The markets remain far too large and far too complex to be completely controlled by government intervention. There is always one greedy or unstable broker sitting at a desk ready to hit the 'trade' button on his Bloomberg terminal."

Javier Blas in the FT: "The critical question still unanswered is what was the motivation behind the PVM employee's actions... Some believe the trades were aimed at pushing prices to a certain level, triggering stop buys from other parties. Stop buys are automatic buy orders that are executed when a certain price is reached. Then a further price spike would have allowed the employee to sell at a profit." ·