EXCLUSIVE-Oil-price bets ahead of Iran war news totalled $7 billion, reporting shows

A series of well-timed market bets on falling oil prices totalling as much as $7 billion during March ​and April spread across multiple exchanges and types of fuel and derivatives just before major ‌Iranian ​policy announcements by U.S. President Donald Trump, according to traders, market experts and Reuters analysis of exchange data.

A series of well-timed market bets on falling oil prices totalling as much as $7 billion during March ​and April spread across multiple exchanges and types of fuel and derivatives just before major ‌Iranian ​policy announcements by U.S. President Donald Trump, according to traders, market experts and Reuters analysis of exchange data. The size exceeds previously reported bets amounting to $2.6 billion, which have already prompted the U.S. administration to warn staff against using nonpublic information for financial benefit. The U.S. Commodity Futures Trading Commission (CFTC) is investigating, a person familiar with the matter told Reuters in April, although the CFTC has yet to officially confirm a probe is underway.

Reuters could not establish who ‌placed the bets and whether they originated in the U.S. or elsewhere. They included short positions, or bets that prices would fall, for derivatives including ICE, CME crude, diesel and gasoline futures. The bets took place on two major exchanges that host benchmark global oil and fuel futures trade: the Intercontinental Exchange (ICE) and Chicago Mercantile Exchange (CME). Both exchanges declined to comment. The CME is investigating the trades, a source familiar with the matter told Reuters.

The well-timed trades have triggered calls from legal experts and lawmakers for regulators to investigate whether they were based on inside information or leaks. Traders first spotted unusual trades on March 23. The ‌trades were executed minutes before Trump announced a delay to threatened attacks on Iranian power infrastructure, triggering an oil price fall.

The same pattern repeated on April 7, before Trump announced a ceasefire with Iran that triggered a fall of as much as 15% in benchmark ICE Brent futures. It ‌happened again on April 17, when Iranian officials and Trump spoke about reopening the Strait of Hormuz, and then again on April 21, when Trump extended the ceasefire. Reuters and other media reported those trades on the most actively traded front-month contracts for the two global crude benchmarks, Brent and West Texas Intermediate. The value of those bets on those four days in March and April stood at around $2.6 billion, according to Reuters initial calculations.

The U.S. Justice Department and CFTC did not immediately respond to requests for comment. A White House spokesperson said: “All federal employees are subject to government ethics guidelines that prohibit the use of non-public information for financial benefit." However, a further analysis of trading data across exchanges and contracts showed traders executed similar bets at exactly the same ⁠dates and times ​for European diesel and U.S. gasoline futures as well as longer-dated contracts for Brent ⁠and WTI, bringing the total to around $7 billion, based on Reuters calculations.

A sell bet - or short selling - means the person executing the trade borrows the derivative from a counterparty, sells it and later buys it back more cheaply when the price falls, keeping the remaining cash as profit. On March 23 and on April 7, 17 and 21, oil prices plunged by over ⁠10%. Reuters calculations show that a short seller with $7 billion could have made hundreds of millions of dollars in profits, depending on the timing of the bets.

The trades look "well informed" as they preceded major announcements, said Adi Imsirovic, from the Center for Strategic and International Studies (CSIS), and a veteran oil trader. U.S. authorities, such as the CFTC, ​can access exchange data to trace who placed the trades and investigate if it decides to, he added. On Thursday, ABC reported the U.S. Department of Justice was investigating $2.6 billion in oil trades related to the Iran war. The DOJ was not immediately available for comment.

The CFTC’s ⁠enforcement director said in March the agency was aware of speculation regarding insider trading in CFTC-regulated markets and was “watching”. BILLIONS OF DOLLARS

"Let's stay with the facts. The volumes were highly unusual. They were concentrated. They were ahead of key announcements," said Jorge Montepeque from Onyx Capital Group, who helped design the modern system of setting oil prices at pricing agency Platts in the 1990s. Brent crude and ⁠low-sulphur ​gasoil futures trade on the Intercontinental Exchange, while West Texas Intermediate crude and gasoline futures trade on the New York Mercantile Exchange, which is owned by CME Group.

On March 23, Trump announced a delay to threatened attacks on Iranian power infrastructure at 1105 GMT. LSEG data shows that between 1049 and 1050 GMT that day, traders placed bets on 20,000 lots of Brent and WTI futures. The selling was spread across the first, second and third month contracts, worth some $1.35 billion, plus an additional $122 million in ICE gasoil - diesel - futures , and $81 million in U.S. gasoline futures , all worth a total $2.2 billion. "Those ⁠quantities are not going to escape scrutiny," said Robert Frenchman, a lawyer at Dynamis LLP in New York, who has previously worked on white-collar crime and insider trading cases.

Trump's March 23 ceasefire announcement triggered a decline in crude futures of as much as 15%, one of the largest intraday ⁠drops on record. The announcement also sent gasoline and gasoil futures down around 12%. On ⁠April 7, sell orders on oil and gasoline prices worth $2.12 billion took place between 1944 and 1945 GMT, well after the market settled, a time when volumes are usually thin. Minutes later, Trump announced a two-week ceasefire with Iran.

On April 17, nearly $2 billion in Brent, WTI, gasoil and gasoline futures were sold at 1224-1225 GMT, minutes before Iranian Foreign Minister Abbas Araqchi said Hormuz would reopen, followed by multiple social media posts by ‌Trump and U.S. officials. On April 21, some $830 million ‌worth of Brent and WTI contracts were sold just 15 minutes before Trump extended the ceasefire. (Additional reporting by Alun John, Alex Lawler and Robert Harvey in London ​and Michelle Price in Washington; Editing by Simon Webb and David Gregorio)