Was One "Rogue Banker" Really to Blame for Oil's Recent Spike?

If you ask the Financial Times, one "rogue banker" is to blame for the recent spike in oil prices. Ask others and all fingers point to Goldman Sachs (as reported here April 10, 2009, the story of Semgroup is an interesting one, perhaps FT would do itself well to acquaint itself with that particular tale?)

Via FT:

The startling spike in oil prices to their highest level this year on Tuesday was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m (€7m) of losses for his company.

PVM Oil Associates, the world’s largest over-the-counter oil brokerage, said on Thursday it had been the “victim of unauthorised trading”. The privately owned company said that as a result of the unauthorised trades it had been forced to close substantial volumes of futures contracts at a loss.

This is the second episode of rogue trading in the oil market this year. In May, an oil trader at Morgan Stanley was banned by the City watchdog after he hid from his bosses potential losses on trades made under the influence of alcohol.

bwhahahahahahahahahahaha. You know, if I were elbowed up against the Goldman boys trying to squeeze a few pennies a barrel, I'd probably be a raging drunk too. Anyway, we are revisiting Forbes on the master manipulation (*cough* sorry, I mean alleged misdeeds *cough*) here for your reading pleasure (refreshing your memory and all):

When oil prices spiked last summer to $147 a barrel, the biggest corporate casualty was oil pipeline giant Semgroup Holdings, a $14 billion (sales) private firm in Tulsa, Okla. It had racked up $2.4 billion in trading losses betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20% of the nation's crude oil inventories. With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.

The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.

What's the evidence of this? Much is circumstantial. Proving oil-trading manipulation is difficult. But numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup's trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring. "Nothing's been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze," says John Tucker, who is representing Kivisto.

I believe I have pointed this out before but Goldman's days are numbered at the top of the investment banking food chain, if not already seriously compromised.

Read the full article - click here