Amanda Cooper and Dmitry Zhdannikov
A series of well-timed market bets on a drop in oil prices totaling $7 billion ($9.6 billion) during March and April spread across multiple exchanges with a variety of oil and derivatives ahead of major Iran policy announcements by US President Donald Trump, according to traders, market experts and a Reuters analysis of exchange data.
The size exceeds previously reported bets of $2.6 billion, which have already prompted the US administration to warn employees against using non-public information for financial gain. The US Commodity Futures Trading Commission (CFTC) is investigating, a person familiar with the matter told Reuters in April, although the CFTC has not yet officially confirmed that an investigation is underway.
Reuters could not determine who placed the bets and whether they came from the United States or elsewhere. They included short positions, or bets that prices would fall, in ICE derivatives, CME crude, diesel and gasoline futures.
The bets were made on the two main exchanges that organize the international trading of oil and oil futures: the Intercontinental Exchange (ICE) and the Chicago Mercantile Exchange (CME). Both exchanges declined to comment. CME is investigating the trades, a source familiar with the matter told Reuters.
The well-timed trades have prompted calls from legal experts and lawmakers for regulators to investigate whether they relied on inside information or leaks.
Traders first saw the unusual trade on March 23. The trade was executed minutes before Trump he announced a delay in the threatened attack on Iran’s energy infrastructure, leading to a drop in oil prices.
The pattern was repeated on April 7, before Trump announced a ceasefire and Iran which caused a fall of about 15 percent in ICE Brent futures. It happened again on April 17, when Iranian officials and Trump talked about reopening the Strait of Hormuz, and then again on April 21, when. Trump extended the ceasefire.
Reuters and other media outlets reported the trades in one-month forward contracts were fully traded for two international benchmarks, Brent and West Texas Intermediate. The value of those bets over those four days in March and April stood at around $2.6 billion, according to a Reuters report.
calculations.
The US Department of Justice and the CFTC did not immediately respond to requests for comment. A White House spokesman said: “All federal employees are subject to government ethics guidelines that prohibit the use of nonpublic information for financial gain.”
However, further analysis of trading data on exchanges and contracts showed traders executed similar bets on the same dates and times for European diesel futures and US gasoline futures as well as long-term Brent and WTI contracts, bringing the total to nearly $7 billion, according to Reuters calculations.
A sell bet – or short sale – means a trader borrows a derivative from a counterparty, sells it and later buys it back at a lower price when the price falls, keeping the remaining money as profit.
On March 23 and April 7, 17 and 21, the price of oil fell by more than 10 percent. Reuters calculations show that a short seller with 7 billion dollars could have made a profit of hundreds of millions of dollars, depending on the timing of the bet.
The deals look “more” like they did before the big announcements, said Adi Imsirovic, from the Center for Strategic and International Studies (CSIS), and a veteran oil trader. US authorities, such as the CFTC, can access exchange data to track who placed the trade and investigate whether it decides to do so, he added.
On Thursday, US news outlet ABC reported the US Department of Justice was investigating a $2.6 billion oil deal related to the Iran war. The DOJ was not immediately available for comment.
The CFTC’s enforcement director said in March the agency was aware of rumors about insider trading in CFTC-regulated markets and was “looking into it”.
Billions of dollars
“Let’s be honest. Journals were very unusual. They were seasoned. They were in front of important announcements,” said Jorge Montepeque of Onyx Capital Group, who helped develop the modern oil price planning system at the Platts pricing agency in the 1990s.
Brent crude and low sulfur futures trade on the Intercontinental market, while West Texas Intermediate crude and gasoline futures trade on the New York Mercantile Exchange, which is owned by CME Group.
On March 23, Trump announced a delay in threatening attacks on Iran’s energy infrastructure at 1105 GMT. LSEG data shows that between 1049 and 1050 GMT that day, traders placed bets on
20,000 lots of Brent and WTI futures. The sale was spread across the first, second and third month contracts, worth $1.35 billion, with an additional $122 million in ICE fuel – diesel – futures, and $81 million in US gasoline futures, all worth a total of $2.2 billion.
“Those numbers will not escape scrutiny,” said Robert Frenchman, a Dynamis attorney in New York, who has previously worked on criminal cases and insider trading.
Trump’s March 23 ceasefire announcement caused crude futures to drop as much as 15 percent, one of the biggest one-day drops on record. The announcement also sent gasoline and kerosene futures down nearly 12 percent.
On April 7, $2.12 billion worth of oil and gasoline sell orders took place between 19:44 and 19:45 GMT, after the market settled, at a time when rates are typically weak. Minutes later, Trump announced a two-week ceasefire with Iran.
On April 17, nearly $2 billion in Brent, WTI, crude oil and gasoline futures were traded at 1224-1225 GMT, minutes before Iranian Foreign Minister Abbas Araqchi said Hormuz would be reopened, followed by numerous social media posts by Trump and US officials. On April 21, Brent and WTI contracts worth $830 million were traded just 15 minutes before Trump extended the ceasefire.
Reuters.
Business Brief Magazine provides top stories, exclusive coverage and expert opinion. Sign up to receive it every weekday morning.
