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James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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Broker Sent Oil Prices to Eight Month High in a Drunken Stupor

On June the 30th 2009 oil mysteriously jumped by more than $1.50 a barrel during the night, to reach its highest price in eight months, the kind of swing that is caused by a major geopolitical event.

The amazing, true cause of this price spike has now been released by a Financial Services Authority investigation (FSA).

Although not authorised to invest company cash in trades Steve Perkins, a long standing, senior broker at PVM Oil Futures, had managed to spend $520 million on oil futures contracts throughout the night.

On the morning of the 30th an admin clerk called Mr Perkins to ask why he had bought 7 million barrels of crude during the night. Mr Perkins had no recollection of the transactions, and it turned out that he had made the trades during a “drunken blackout.”

By the time PVM had realised the transactions had not been authorised by a client, they had incurred losses of $9,763,252.

RELATED: An Inside Look at the Energy Markets

Between the hours of 1.22am and 3.41am, Mr Perkins gradually bought 69 percent of the global market, whilst driving prices up from $71.40 to $73.05, by bidding higher each time.

At 6.30am, presumably sobering up and realising what he’d done, he sent a message to his managing director claiming an unwell relative meant he would not be able to make it into work.

Following an official investigation Mr Perkins admitted to having a drink problem, had his trading license revoked for five years, and was given a fine of £72,000.

The FSA have said that they will re-approve his license after the five year period, if he has recovered from his drink problem, although they warned that “Mr Perkins poses an extreme risk to the market when drunk.”

By. James Burgess of Oilprice.com - The No.1 source for Oil Prices

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Leave a comment
  • JohnG on October 04 2012 said:
    He made the right trade. They should have took possesion and held on to it. $91 today. Would have made $20/barrel!
  • CoachP on September 29 2012 said:
    Manana1, you are absolutely correct. Just checked a spreadsheet and the volume for then benchmark AUG 09 WTI contract alone was north of 220k or 220mm bbl.

    Looked at the CNBC version of this same story and the comments are full of laughable HFT or manipulation accusations. Of course going long with that kind of size in the illiquid overnight would pressure the bid. Nowhere in this story is it reported how the rest of that day went.

    OPEN/HIGH/LOW/CLOSE on 6/30/09:
    71.60 73.38 68.90 69.89

    As Manana1 wrote, "And lastly IF he had such a manipulative effect on Crude Oil, why did his firm lose roughly 10 million?" The fact that this guy got thumped when it went wrongway on him is embedded in the reporting that he LOST MONEY.

    BTW... WTI was trading below $60 just six trading days later.
  • RogueTrader on September 29 2012 said:
    I want to know if the counterparty to those trades is the same person who stood Mr. Perkins all those drinks...
  • What Next on September 28 2012 said:
    "They warned that,'Mr Perkins poses an extreme risk to the market when drunk."

    Now, we don't only have to worry about drunk drivers, we also have to worry about drunk traders!!!
  • Keith C on September 28 2012 said:
    His employer such be commended for the excellent controls at place in their business. mmm I wonder if anybody made a killing on oil futures during this escapade??
  • andy graham on September 28 2012 said:
    Re "has now been released" -- wasn't this investigation completed in 2010? I can't find anything more recent about it on FSA's site
  • mark edward marchiafava on September 27 2012 said:
    What's the big fuss over? The United States congressmen do worse things and STILL keep their jobs.
  • Al on September 27 2012 said:
    "A fine of 72,000 euros? Is that like Monopoly money?"

    Looks like Mark doesn't know the difference between the Euro symbol and the Pound Sterling symbol.
  • William on September 27 2012 said:
    I have to point out here, that the reinstatement of his license after 5 years is completely idiotic. This guy needs to have some sort of supervised activity and not allowed to access his account from home if that is the case. Here is the reason I'm arguing this:

    As someone whose recovered from several 'addictions' and understands several of the mechanics involved, there are numerous reasons why one may have these problems--not the least of which can be job related stress. If he isn't going to have his license in the period of time in which he's expected to rehabilitate his disease, then we don't really know that anything was cured -- perhaps the source was the stress of high dollar monetary transactions. If that's the case, he'll have no problem staying off the drink while he is suspended, and a big problem staying off the drink when he's not anymore.
  • HockeyGuy on September 27 2012 said:
    they should have forced him to take delivery of the oil
  • Manana1 on September 27 2012 said:
    He used half a billion in buying power during GLOBEX not RTH! and only moved it 2%. Hardly call that evidence of crude oil markets being easy to manipulate.

    Secondly 69 percent figure is misleading, what was the daily volume, I suspect 15-25 times (minimum) of his 7,000 contracts, the average volume per day is around 200,000 contracts, so his "volume" was only a few percent of what was traded that day.

    And lastly IF he had such a manipulative effect on Crude Oil, why did his firm lose roughly 10 million? Do the math he LOST roughly 1.40 per contract. So the market reversed the gain he had caused and went down an additional 1.40 in the span of a few hours.
  • Bill Small on September 27 2012 said:
    Hmm...wonder if he drank with the clown that piloted the Valdez?
  • andy Kelly on September 27 2012 said:
    This should hopefully put an end to the debate on whether oil markets are manipulated. If one drunken buffoon can cause the price to move significantly - imagine what Goldman's, MS and the other banks can do.
  • Hans Nieder on September 27 2012 said:
    More 90% proof licenses are not need...
  • Mark on September 27 2012 said:
    A fine of 72,000 euros? Is that like Monopoly money?

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