UpdateMarathon pays $1m in CFTC oil case

01 August 2007 22:52  [Source: ICIS news]

By Stephen Burns

(Adds Platts comment in paragraph 9 and detail in paragraph 11)

HOUSTON (ICIS news)--A US regulator on Wednesday said Marathon Oil has agreed to pay a $1m (€730,000) penalty to settle a charge of oil market manipulation, and to co-operate in an ongoing probe of the oil trading "window" operated by pricing service Platts.

The Commodity Futures Trading Commission (CFTC)  investigation of Marathon had come to light in May, when the probe - relating to trading that occurred on 26 November 2003 - was revealed in a securities filing by the Houston-based integrated oil company.

CFTC spokesman Dennis Holden said the regulatory action against Marathon Oil is the first to involve physical oil trading by a major firm.

The CFTC order said that in an effort to distort an index price published by Platts, Marathon sold crude in the Platts window at prices lower than it had to, bypassing bids at higher levels. Marathon stood to benefit because it was a net purchaser of foreign crudes priced against that index.

In an unusual move, the order published by the CFTC on Wednesday explicitly stated that regulators' are conducting a continuing investigation of physical West Texas Intermediate (WTI) crude oil trading in the Platts window.

"[Marathon] agrees to cooperate fully and expeditiously with the government's ongoing efforts to discover documents and information relating to trading in the Platts window and other conduct influencing and/or affecting the Platts market assessment for WTI," the order said.

Holden acknowledged that it is extremely rare for the existence of a continuing investigation to be confirmed, but would not elaborate. "The document speaks for itself," he said.

Officials at Marathon and Platts were not immediately available for comment. A story on the Marathon case published on the Platts website on Wednesday did not mention the order's reference to the ongoing investigation.

A Platts spokeswoman declined to comment, citing company policy.

Of the 38 energy-related CFTC probes that have amassed $308m in penalties since December 2002, most have involved natural gas markets.

The CFTC has now announced three high-profile energy market manipulation cases in the past week. The CFTC said it is currently investigating 100 companies and individuals for energy-related issues, but has not given further details.

Holden quoted Gregory Mocek, the CFTC’s director of enforcement, as saying there was "no connection whatsoever" between the timing of the latest announcements and the congressional hearings that started in June on energy market manipulation.

Those hearings gave US chemical company executives a fresh opportunity to air complaints that prices for natural gas - the key feedstock for the US industry - were subject to manipulation.

($1 = €0.73)
By: Stephen Burns
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