Industry News

PVM Oil Associates, the world's largest over-the-counter oil brokerage, said on Thursday it has lost just under $10m after one of its employees engaged in "unauthorised trading" in Brent futures.

"PVM Oil Futures Ltd can confirm that it was the victim of unauthorised trading on Tuesday June 30," the company said in a terse statement.

PVM is a private company owned by its employees, lead by managing director David Hufton.

It added: "As a result of a series of unauthorised trades, substantial volumes of futures contracts were held by PVM. When this was discovered, the positions were closed in an orderly fashion. PVM suffered a loss totalling a little under $10m."

PVM said it has informed the UK regulator, the Financial Services Authority, as well as the InterContinental Exchange, the marketplace for Brent, where the "unauthorised trading" took place, according to people familiar with the situation.

"PVM is conducting a full investigation, and cannot comment further until that investigation has been completed," the company said in its statement. "PVM expects the highest standards of conduct from its people and takes any contraventions of those standards extremely seriously."

Rival traders were surprised by the news, because PVM does not take positions on its own behalf but only on behalf of clients.

It was unclear how the broker was able to put its trades on the market. People familiar with the matter said PVM had discovered the trading pattern on Tuesday morning (NASDAQ: TUES - news) .

Traders in New York said that there was a spike in business activity in the early hours of Tuesday, a period usually quiet for oil trading. "Trading rose and prices jumped $2 a barrel without apparent justification," said one senior oil trader at the Nymex commodity futures exchange.

Brent prices jumped from around $71 a barrel at the open of ICE trading at 0000 GMT to about $73.50 a barrel, before easing to about $72 a barrel when European traders came in at around 0800 GMT, according to Reuters data.

Traders said it was unclear if prices had fallen simply because the buying dried up or because someone started to sell futures.

The data showed that more than 16m barrels of Brent traded in the space of just over an hour - an unusual amount for a period of the European night which usually sees trading of about 1m barrels, and double the daily production of Saudi Arabia, the world's largest oil producer.

PVM is based in London and has also offices in Vienna, New Jersey, Houston and Singapore. It was founded in 1971 and deals in the bilateral, private over-the-counter market for oil and oil products. It has 130 staff.

"Staff are experts in their field with backgrounds in major oil companies, ship brokers and futures and financial houses," according to the company's website.