Why don't we call it $73 a barrel? (hiccup)

When British broker Stephen Perkins returned home drunk from a weekend golf outing last year, he didn't fall asleep or pass out, he started trading oil futures. Lots of oil futures.

Mr. Perkins plunked down in front of his laptop the afternoon of June 29, 2009, swilled back more booze, and launched into an unauthorized trading binge that lasted all night and sent the price of oil to its highest level in eight months. He also added to the growing controversy about speculators in the oil market who many accuse of artificially, and sometimes illegally, driving up the price.

Despite being so drunk he later couldn't recall anything, Mr. Perkins managed to buy 9,045 lots of the August, 2009, Brent crude contract, according to documents released Tuesday by Britain's Financial Services Authority. He sold 1,920 lots, leaving him with 7,125. That's the equivalent of 7.1 million barrels of oil worth roughly $520-million (U.S.) at the time. Most of his trades came between 1:30 and 3:30 a.m., normally a quiet time for global oil markets.

Mr. Perkins single-handedly dominated the market that night, accounting for 69 per cent of all trades and continuously buying contracts at a slightly higher price, ensuring it kept rising, the FSA said.

By the time London brokers arrived at their desks on June 30, they were stunned. The price of Brent crude, an indicator that sets the overall price of oil, had jumped $2 a barrel to $73.50, the highest all year. Overnight trading was 17 times the normal volume. Some analysts began issuing reports, attributing the price hike to Nigerian rebel attacks, or expiring futures contracts or simply "speculation." Mr. Perkin's firm, PVM Oil Futures Ltd., issued a bullish note on oil, telling investors "there's some serious upside momentum building."

Mr. Perkins didn't stop. Starting at 7 a.m. on June 30, he began selling more than 2,500 lots, prompting the price to start falling. He also sent a text message to his boss saying he wouldn't be in that day because of a sick relative.

Just before 8 a.m., one of the firm's administrative clerks contacted Mr. Perkins to ask which client had ordered overnight trades. PVM is an execution-only brokerage, meaning it does no proprietary trading but makes trades on behalf of clients. Mr. Perkins told the clerk that a client, not named by the FSA, had been at his home all night directing the trades. The clerk began processing the trades in the client's name, prompting more inquiries from PVM officials who eventually told Mr. Perkins to stop trading from home and direct the trades through the office.

Finally, at 10 a.m., after more phone calls from bosses, Mr. Perkins admitted the client had not authorized any of the trades. The firm fired Mr. Perkins, who had been there since 1998, and called in regulators and police. It also unwound the trades, taking a $10-million loss. After intense media speculation, PVM issued a terse press release two days later confirming it had been "the victim of unauthorized trading."

"PVM expects the highest standards of conduct from its people and takes any contraventions of those standards extremely seriously," the firm added. By the end of the week, the price of Brent oil had sunk below $63 a barrel.

On Tuesday, the FSA banned Mr. Perkins from the industry for a minimum of five years, on the grounds that he was "not a fit and proper person." It also fined him £72,000 ($108,400).

Mr. Perkins, 34, had told the FSA that he "was in an alcoholic-induced blackout" during the trading and had "limited recollection of events", the agency said in its report. The FSA accepted the explanation but said just because "a person is drunk when he behaves in a certain way does not negate a finding of market abuse or a finding that they are not fit and proper."

The Authority did cut Mr. Perkins some slack. It cut the fine in half because of his "serious financial hardship" and it promised to review the case in five years. The agency noted that Mr. Perkins has been in a drug rehabilitation program and "has stopped drinking."

"For this reason, the FSA considers that it is possible that Mr. Perkins may be rehabilitated over time and may be fit and proper again in the future," the agency said. In five years, the FSA said it would consider "whether Mr. Perkins' alcoholism continues to present a risk" and added that it "may be minded to revoke the prohibition."