A BP plc spokesperson on Tuesday confirmed a report in The Wall Street Journal indicating federal investigators are investigating whether the London-based oil major manipulated crude oil and unleaded gasoline markets in 2002, 2003 and 2004. BP already is facing allegations by the Commodity Futures Trading Commission (CFTC) that it manipulated the U.S. propane market in 2004 (see Daily GPI, June 29).
With little comment, a BP spokesperson said the company was complying with all requests from investigators concerning the investigation. No charges have been filed, and the CFTC had no comment.
According to The Journal, the CFTC has sent subpoenas to BP and to some of its energy traders. The gasoline investigation apparently has been under way for more than a year and includes a criminal probe by the Justice Department. The newspaper indicated federal investigators are examining a single day’s trading on the New York Mercantile Exchange (Nymex) in 2002.
In its propane investigation, the CFTC filed a civil enforcement action against BP Products North America for allegedly cornering the propane market in February 2004 to drive up prices. BP denied the charges, and has said “legitimate forces of supply and demand” were the cause of the price increases.
However, the CFTC said in June, “With the knowledge, advice and consent of senior management, BP employees developed and executed a speculative trading strategy in which BP cornered the February 2004 TET physical propane market” by purchasing enormous quantities of propane for delivery to Texas Eastern Products Pipeline Co.’s (Teppco) pipeline system in Mont Belvieu, TX, and then withholding some of that supply to drive up the winter price of the heating fuel.
Currently, investigators appear to be examining whether BP used information about its own pipelines and storage tanks at an oil-delivery point in Cushing, OK, to influence crude-oil price benchmarks.
“Several” energy traders apparently told The Journal that in the past year, the CFTC has sent out demands for information about transactions involving BP to oil-trading firms and Wall Street commodities desks. “In addition, the agency has conducted informal, voluntary meetings with traders at some of these firms as part of its interest in BP and other oil majors’ trading operations…In its inquiries to traders, the CFTC asked questions about whether it was common industry practice when a trader manages storage tanks or other assets and uses those assets in trading strategies.”
In 2003, the CFTC completed a similar investigation against BP, and the company was never charged. According to a Security and Exchange Commission filing, BP agreed in 2003 to pay Nymex $2.5 million to resolve allegations that it had improperly traded crude oil. In that case, BP was investigated for 10 alleged oil-trading violations between 2000 and 2001, which apparently included simultaneous swaps, or wash trades. BP did not admit guilt and denied any wrongdoing.
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