Unauthorised trading in Brent futures contracts on June 30 by a staff member at oil broker PVM was not the main cause of a spike in oil prices, according to traders.
A report in today's Financial Times entitled Rogue oil broker triggered price spike says that the unauthorised trades at PVM, which resulted in a $10 million loss for the brokerage, caused "a startling rise in oil prices to their highest level this year".
The price of West Texas Intermediate (WTI) traded on Nymex peaked at $73.50 in the early hours of Tuesday UK time - rising $2.50 in one hour - though they have since fallen to $66.5 a barrel.
While market participants agree that the rogue PVM broker was able to contribute to a rise in price because of the thin volumes early on Tuesday morning, traders also reported a prior squeeze in the Asian markets at midnight UK time, trying to catch up with a strong closing in New York before European markets opened.
"Volumes were very low and the spike was not all that volatile because the market started growing from about midnight, so you had a technical breakout at about $71," says Andrey Kruyuchenkov, associate director of commodities at Russian bank VTB. "The market was already growing well before it [the rogue trades] happened and then as the market pushed above $71 some triggers were hit and the price came off straight away. I don't think you can say that PVM has caused the spike in prices - there are much larger factors at play here."
Kruyuchenkov says that while the trades did affect sentiment, "the market came off immediately because other players stopped selling at that level; it hasn't really changed anything".
Commodity prices fell sharply on Thursday following the release of the US unemployment figures. The dollar moved higher as traders moved out of commodities.
"There has been talk of green shoots and the market has been rallying quite sharply, but I think globally things still look dismal, and the unemployment figures coming out of the US yesterday reflect this," says a London-based oil trader. "With gold prices also falling, it looks like things are on their way back down. At the moment everything seems quite disjointed and the historical correlations have all gone a bit wayward. I think there will be a retrenchment down to low $60s per barrel," he says.
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