The Commodity Futures Trading Commission (CFTC) has ordered Marathon Petroleum Co. (MPC), a subsidiary of Ohio-based Marathon Oil Corp., to pay a $1 million civil penalty for attempting to manipulate crude oil spot prices.
In an order simultaneously filing and settling charges against MPC, the CFTC alleged that MPC attempted to manipulate a price of spot cash West Texas Intermediate (WTI) crude oil delivered at Cushing, OK, on Nov. 26, 2003 by attempting to push down the Platts market assessment for spot cash WTI for that day.
The market assessment, derived from trading activity during a particular 30-minute period (window) of the physical trading day, is used as the price of crude oil in certain transactions. At the time in question, MPC priced approximately 7.3 million barrels of physical crude oil per month off of the Platts market assessment for WTI and would have benefited from a lower assessment, according to the CFTC.
The order finds that MPC purchased Nymex WTI contracts with the intention of selling physical WTI during the Platts window at prices intended to push the assessment downward. Further, during the Platts window, MPC knowingly offered WTI through the prevailing bid at a price calculated to push down the Platts WTI assessment.
MPC reached the settlement agreement “without admitting or denying the findings,” a company spokesman said. “MPC’s decision to settle was based on a number of factors, including the desire to avoid the expense and distraction of protracted litigation.”
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