Oil trader Arcadia Petroleum settles with CFTC

Global oil trading house Arcadia Petroleum and its affiliates agreed to pay $13m to settle claims from US regulators that they illegally manipulated oil futures prices, according to documents filed in a New York federal court on Monday.

The action concludes a case brought by the CFTC after the 2008 oil price run-up, when they peaked at $147 a barrel and brought into focus the role of speculators in the market.

But the case has been a focus among oil traders as it involves the Commodity Futures Trading Commission’s case was built around activities around the physical oil market.

In addition to the fine, UK-based Arcadia Petroleum, Arcadia Energy in Switzerland, US unit Parnon Energy, Arcadia trader Nicholas Wildgoose and Parnon trader James Dyer face a three-year limit on trading physical US benchmark crude and are required to hire an independent consultant to improve their record keeping and oversight practices.

Arcadia and Parnon are both owned by Norwegian billionaire John Fredriksen.

The CFTC, which filed the suit in May 2011, alleged that the defendants made $50m through misconduct surrounding tanks in Cushing, Oklahoma, the delivery point for benchmark West Texas Intermediate crude. In early 2008 the two company traders rapidly filled and emptied tanks to sway prices on the futures market, according to the CFTC.

“Through resolution of this litigation, the CFTC is holding accountable market participants who sought to profit by undermining the integrity of the US crude oil markets,” said Aitan Goelman, director of enforcement at the US commodities regulator.

As part of the settlement the defendants – who neither deny nor admit wrongdoing – must also provide the CFTC with a weekly list of their crude oil positions for delivery at Cushing.

Arcadia and Parnon could not be reached for comment.