ICE toughens stance on European oil trade

IntercontinentalExchange energy trading platform narrowed the regulatory gap between the US and Brent oil benchmarks with its first public breakdown of who is dealing its contracts. It also slapped fines on Goldman Sachs for 'disorderly trading' and on J.P. Morgan Securities for breaking exchange rules on the deadline for submitting data. Neither bank was immediately available for comment. Fines from the exchange have many precedents.
But the European analysis of what types of traders are active narrows the gap between the New York Mercantile Exchange (NYMEX) - part of the CME Group and governed by the US regulator - and the ICE, which is governed by Britain's traditionally light-touch Financial Services Authority. Its new weekly Commitment of Traders report for its Brent crude and gasoil futures contracts follows a model long-established in the United States.
Although criticised for being not sufficiently precise, the US regulator's report is still considered useful. Traders, keen for information, and investors who increasingly favour Brent over the US equivalent broadly welcomed the increased transparency in Europe. "It's another tool that people will use to base their 'shall I, shan't I?' type analysis on," said Tony Machacek of Bache Commodities.
"It won't necessarily change prices or trends, but if you see speculators are looking long, it might put you off going long yourself. You might think it's looking over-bought." The ICE previously only provided data to the US regulator, the Commodity Futures Trading Commission (CFTC), for its weekly report on ICE's US crude oil futures contract.
The European report will divide information into the same four categories of market participants as those used by the CFTC: producers, swap dealers, money managers and other reportables. It will be published at noon London time (11:00 GMT) each Monday and initially will only cover Brent and gas oil. The US data is published on Fridays.
Some traders have argued previously the lack of a CFTC-style analysis of players active on ICE was an advantage for those wishing to stay beneath the parapet. On Monday, however, commentators said increased transparency could equally serve to attract participants to ICE-traded contracts and away from the land-locked main US contract, which many have argued no longer reflects the international oil market.
Brent's premium to US crude last week climbed to a record of more than $23 a barrel. "My view is that the oil market players have gotten more broad and as such have realised that a waterborne marker is a much better indicator than a land-locked one," said a hedge fund trader based in New York who asked not to be named. "I think the two will flip in share. WTI will have the share that Brent had five years ago and vice versa."
The first report showed "money managers" were net long 81,294 lots of Brent futures and options, and 41,322 of gas oil as of June 14. The data was published for the previous two weeks. The unusual strength of US crude has also been blamed on trading irregularities.
Also on Monday, the ICE website revealed a 25,000 pounds ($40,340) penalty on Goldman Sachs for what it called "disorderly trading" in oil contracts. The exchange said in a circular on its website its monitoring on January 28 had detected six "price spikes" in the April 2011 spread between Brent and US crude, known as West Texas Intermediate (WTI). In addition, J.P. Morgan Securities Ltd was fined 20,000 pounds for breaking exchange regulations concerning submitting information by a cut-off time in March and April. The contracts concerned were not specified.