Oil-price bets ahead of Iran war news totalled $7 billion, reporting shows
Amanda Cooper And Dmitry Zhdannikov
A series of well-timed bets that oil prices would fall spread across multiple exchanges, fuels and derivatives in March and April and occurred just before U.S. President Donald Trump’s major announcements on Iran policy, according to traders, market experts and a Reuters analysis of currency data.
This amount exceeds previously reported bets of $2.6 billion, which led the US administration to warn staff about the use of non-public information for financial gain. The U.S. Commodity Futures Trading Commission (CFTC) is investigating, but the CFTC has yet to officially confirm an investigation is underway, a person familiar with the matter told Reuters in April.
Reuters was unable to identify who placed the bets and whether they originated in the United States or elsewhere. These included short positions or bets that prices would fall in derivatives including ICE, CME crude oil, diesel and gasoline futures.
The bets were placed on two major exchanges that host global oil and fuel futures trading: the Intercontinental Exchange (ICE) and the Chicago Mercantile Exchange (CME). Both exchanges declined to comment. A source familiar with the matter told Reuters that CME is investigating these transactions.
The well-timed trades have led legal experts and lawmakers to call on regulators to investigate whether the trades were based on inside information or leaks.
Investors first noticed the unusual transactions on March 23. The transactions took place just minutes before Trump announced he was postponing his threat to attack Iran’s energy infrastructure, causing a drop in oil prices.
The same pattern was repeated on April 7, before Trump announced a ceasefire with Iran, leading to a drop of up to 15 percent in benchmark ICE Brent futures. This happened again on April 17, when Iranian officials and Trump talked about reopening the Strait of Hormuz, and then again on April 21, when Trump extended the ceasefire.
Reuters and other media reported that these transactions took place in the most actively traded front-month contracts for Brent and West Texas Intermediate, two global crude oil benchmarks. According to preliminary data from Reuters, the value of these bets over four days in March and April was approximately $2.6 billion.
calculations.
The U.S. Department of Justice and the CFTC did not immediately respond to requests for comment. A White House spokesman said: “All federal employees are subject to government ethics rules that prohibit the use of nonpublic information for financial gain.”
However, a more detailed analysis of trading data across exchanges and contracts showed investors executed similar bets on exactly the same dates and times for European diesel and US gasoline futures, as well as longer-term contracts for Brent and WTI, bringing the total to nearly $7 billion, according to Reuters calculations.
A put bet – or short put – means that the trader borrows the derivative from the counterparty, sells it, and then buys it back cheaper when the price drops, keeping the remaining cash as a profit.
Oil prices dropped by more than 10 percent on March 23 and April 7, 17 and 21. Depending on the timing of the bets, a $7 billion short seller could make hundreds of millions of dollars in profits, Reuters calculations show.
Veteran oil trader Adi Imsirovic of the Center for Strategic and International Studies (CSIS) said the trades appeared “well informed” because they were made before major announcements. He added that U.S. authorities such as the CFTC could access exchange data to track who is making the trades and conduct investigations if they decide to do so.
On Thursday, American news outlet ABC reported that the US Department of Justice is investigating $2.6 billion worth of oil dealings related to the Iran war. The DOJ was not immediately available for comment.
The CFTC’s executive director said in March that the agency was aware of and “monitoring” speculation regarding insider trading in CFTC-regulated markets.
Billions of dollars
“Let’s stay with the facts. The volumes were extremely unusual. They were concentrated. They were ahead of major announcements,” said Onyx Capital Group’s Jorge Montepeque, who helped design the modern system for setting oil prices at pricing agency Platts in the 1990s.
Brent crude and low-sulfur diesel futures are traded on the Intercontinental Exchange, while West Texas Intermediate crude and gasoline futures are traded on the New York Mercantile Exchange, owned by CME Group.
On March 23, Trump announced the postponement of threatening attacks on Iran’s energy infrastructure at 11:05 GMT. LSEG data shows that between 1049 and 1050 GMT that day, investors bet on:
20,000 lots of Brent and WTI futures. The sale spread across first, second and third month contracts worth approximately $1.35 billion; It also added $122 million to ICE diesel futures and $81 million to U.S. gasoline futures, all for a total value of $2.2 billion.
“These amounts will not escape scrutiny,” said Robert Frenchman, an attorney at Dynamis in New York who has previously worked on white-collar crime and insider trading cases.
Trump’s ceasefire announcement on March 23 caused a drop of as much as 15 percent in crude futures; This is one of the largest intraday declines in history. The announcement also caused gasoline and diesel futures to fall by around 12 percent.
On April 7, sell orders on oil and gasoline prices worth $2.12 billion were executed between 19:44 and 19:45 GMT, well after the market had calmed down, at a time when volumes were generally weak. Minutes later, Trump announced a two-week ceasefire with Iran.
On April 17, nearly $2 billion worth of Brent, WTI, kerosene and gasoline futures were sold at 1224-1225 GMT, minutes before Iranian Foreign Minister Abbas Araqchi said Hormuz would reopen, followed by numerous social media posts by Trump and U.S. officials. On April 21, approximately $830 million worth of Brent and WTI contracts were sold just 15 minutes before Trump extended the ceasefire.
Reuters.
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