E
arly Wednesday morning, May 6, when most of the East Coast was still asleep, one trader was clearly wide awake. At 3:40 am, more than 10,000 contracts for the future sale of oil barrels were exchanged, with a total value of $920 million. One hour and 10 minutes later, Axios news outlet revealed that a deal between the US and Iran to end the conflict was on the table. The price of crude oil dropped 12% in a matter of minutes. The potential gain for this early-morning trader? $125 million, according to The Kobeissi Letter, a financial newsletter that uncovered the existence of these unusually timed and sized transactions.
There are two possible explanations: Either the trader in question, whose identity is unknown, had a stroke of luck in the middle of the night, or he benefited from privileged information about the progress of the negotiations and the timing of the media announcement. The problem is, this was not an isolated incident. Similar transactions have been observed at each of Donald Trump's (many) surprise reversals since the war began.
Suspicious transactions on oil markets – according to Reuters, which conducted a reconciliation of the data – have amounted to $7 billion since the conflict began on February 28, with potential profits of several hundred million dollars. On markets where tens of billions are traded, it is not the amounts at stake that are crucial here, but the repeated pattern, which undermines the very functioning of the system. The future contracts in question are tools for hedging against risk. They allow oil producers and major buyers (such as airlines) to protect themselves from future price fluctuations, and thus to benefit from predictable revenues and expenses.
