CFTC Staff Told to Retract Analysis of Suspicious Oil Trades Traders placed billions of dollars' worth of contracts predicting oil would fall and the S&P 500 would rise about 15 minutes before President Donald Trump announced his U-turn on striking Iranian power plants. The US Commodity Futures Trading Commission's analysts filed a referral to the Division of Enforcement to investigate potential insider trading, but a senior adviser to the agency's chairman told a supervisor to retract the referral. The CFTC's enforcement division is continuing to probe the trading activity, and the Justice Department has opened a parallel investigation, with the agency looking at March and April with a particular focus on March 23. By Charles Gorrivan, Lydia Beyoud and Nicola M White (Bloomberg) -- When President Donald Trump backed away from threats to strike Iranian power plants on March 23, it sparked a frenzy of buying and selling across oil, equities and other markets. Traders had grown accustomed to prices lurching wildly on developments in the Middle East. But this time, some bettors had timed it perfectly. Billions of dollars’ worth of contracts predicting oil would fall and the S&P 500 would rise were placed about 15 minutes before the president announced his U-turn in a post on Truth Social, fueling widespread speculation about whether someone had an unfair advantage. Responsibility for looking into the incident fell to the US Commodity Futures Trading Commission, the federal derivatives regulator whose remit — and profile — has soared with the advent of cryptocurrencies and prediction markets. There, a team of career forensic analysts embarked on their usual task of pulling together data on the day’s winners and losers. Based on the timing of the trading they observed and who was behind it, the analysts, from the agency’s Division of Market Oversight, filed a referral to the Division of Enforcement, which would decide whether to launch a full-scale investigation into potential insider trading, according to people familiar with the matter who asked not to be identified discussing government deliberations. Representatives from the two divisions also met and talked through how best to collaborate, people familiar with the matter said. What happened next, they said, was highly unusual: Mel Gunewardena, a senior adviser to the agency’s Trump-appointed chairman, Michael Selig, told a supervisor within the market oversight team to retract the referral. Michael Selig The team didn’t know how to proceed, the people said. As a practical matter, it was unclear how they might even carry out such an action since it had rarely, if ever, been done before. It marked a break with precedent in another way as well. Career experts had always been entrusted with the specialized but prosaic task of gathering reams of data and writing preliminary reports that the attorneys in enforcement would then decide whether to pursue. Now, according to the people, an adviser to political appointee Selig was intervening to scuttle the referral and oversee the gathering of data himself. Gunewardena, a Wall Street veteran who spent time at the CFTC during the first Trump administration, had rejoined the agency a few weeks before as head of the Office of International Affairs and Senior Markets Advisor to the chairman, and it wasn’t clear what role he had in the evidence-gathering process. “In every previous administration I’m familiar with, that would not just have been unusual — but never done,” Aitan Goelman, who served as the agency’s Director of Enforcement from 2014 to February 2017, said when asked generally about such an intervention. "It makes it harder for the staff, if they know that any moment the rug can get pulled out from under them." The traders flagged by the forensic analyst unit as warranting further investigation have not been publicly identified. The CFTC declined to comment, saying it can’t confirm or deny investigations. Gunewardena did not respond to a request for comment through the regulator’s press office. An official at the agency said that, because the original findings were US-focused, it was determined there should be a more comprehensive review of markets internationally, including futures, swaps, over-the-counter activity, options and exchange-traded funds. As a former Goldman Sachs Group Inc. and State Street Corp. executive — and the most senior official at the CFTC focused on market analysis and oversight — Gunewardena was best placed to lead that exercise, said the official, who declined to be named discussing internal agency decisions. The CFTC’s enforcement division is continuing to probe the trading activity. The agency is looking at March and April with a particular focus on March 23, the official said. The Justice Department has opened a parallel investigation, a person familiar with the matter said earlier this year, asking not to be identified due to its sensitivity. A department spokesperson last week declined to comment on the status of the probe. The trading in question was eye-popping. In a two-minute window starting at 6:49 a.m. in New York on March 23, traders sold contracts equivalent to at least 6 million barrels of Brent and West Texas Intermediate, more than 8.5 times the volume that had changed hands that time in the morning over the prior week. A similar increase in activity was observed in futures tied to the S&P 500, with contracts worth more than $2 billion in notional value traded — far more than would be expected in an otherwise quiet premarket session. Unusual volumes were also visible in natural gas and other futures markets. Those trades paid off 15 minutes or so later, when Trump wrote on Truth Social that he was reversing his threat to attack Iranian infrastructure unless the country re-opened the Strait of Hormuz. Brent oil prices plunged as much as 14% after the post. US crude plummeted in the double digits as well, while stock markets in the US and Europe jumped about 4% from their session lows to intraday highs. “The fact that this trading preceded a headline driven sell-off means that either someone got very lucky or knew something,” said Tim Skirrow, head of derivatives at Energy Aspects, adding that it wasn’t clear from the publicly available data which it might be. As the Iran conflict deepened, examples multiplied of large, markedly well-timed trading in futures and prediction markets, including before Trump declared a cease-fire on April 7, and before Iranian Foreign Minister Abbas Araghchi announced 10 days later that Hormuz would reopen. The CFTC’s forensic analyst group continued compiling and parsing the data, but after Gunewardena’s intervention, they were no longer consulted by the rest of the agency, according to the people familiar. Ships line up in the Strait of Hormuz near Khor Fakkan, United Arab Emirates, in March. Gunewardena assembled his own team to conduct a new analysis of the trading. By July, the supervisor Gunewardena had told to retract the referral had left the agency. Other members of the team resigned or were moved to other roles, including some under Gunewardena. It’s not clear if the personnel changes were related to the episode. Since Trump returned to the White House in January 2025, the CFTC has shed more than 20% of its staff, part of a wide-reaching shrinkage of the government. Selig took the agency’s reigns in December promising to promote innovation and curb what he described as a culture of “over-zealous regulation.” Enforcement actions are down — there were 13 in fiscal 2025 and a similar number in 2026. That compares with 58 for 2024 and 96 in 2023, according to the agency’s data. At the same time, there’s been a steady drumbeat of reports about suspicious trading ahead of government decisions on both traditional futures and recently authorized prediction markets, where users can place wagers on everything from Monday Night Football to election results and geopolitical events. Last year, unknown traders made millions of dollars buying options in the minutes before Trump paused tariffs. This year, there was suspicious trading on prediction markets ahead of the US military’s capture of then-Venezuelan leader Nicolás Maduro and the joint US-Israel operation that killed Iran’s Ayatollah Ali Khamenei. In April, US authorities accused a soldier of making $400,000 on Polymarket using confidential information from the Maduro raid. “Anyone who engages in fraud, manipulation, or insider trading in any of our markets will face the full force of the law,” Selig said in a statement at the time. The soldier pleaded not guilty to Justice Department charges. Bets tied to the Iran conflict, however, have been of an order of magnitude larger. “The integrity of America’s commodity futures markets must remain above reproach,” a group of Democrats, led by Senator Raphael Warnock, wrote in a May letter to Selig about the Iran trades. “It is critical that this investigation be carried out swiftly and publicly to reassure existing market participants that markets are stable and no participant has an unfair advantage.”

GOLDEN AGE OF GRIFT ™️ 😬

I just read Iran just attacked ships off the coast of Qatar and in the middle of the gulf of Oman for the first time - it looks like they are determined to help Kepler & Friends to do a better job in counting who can cross Hormuz (because Iran allows them) vs who cannot.

US: Here's the deal - You release SPR, or else we cut off diesel exports. Europe: We don't have much choice. Here's 100 mb for the market. US grins. #oott

BREAKING: US, UK, France, Germany, Italy, Japan, Canada have just agreed to a coordinated release of 100 million barrels of crude oil and diesel through the IEA, beginning immediately over four months, with a frontloaded substantial diesel release within the first 20 days, per Macron. The G7 says it will coordinate refinery maintenance schedules to prevent simultaneous shutdowns, will convene at the IEA in the coming days on the possibility of additional diesel releases, and calls on all producers to refrain from export bans "that could exacerbate market tensions." The US told Germany and France on Thursday to draw down their emergency diesel reserves immediately or face a US diesel export ban, and asked the EU for 120 million barrels over six months. The US offered its own 40 million barrel SPR release on Tuesday.

France is winning brownie points in the Middle East: 1) TotalEnergies is helping several countries (notably Iraq) to ship crude oil throughout the Strait of Hormuz (sure, this is a private company, but I doubt TTE has not consulted the French government about it). 2) Paris is sending soldiers and kit to Yanbu to help the Saudis against missile attacks from the Houthis 3) France deployed Rafale fighter jets over the United Arab Emirates early in the conflict, ostensibly to protect the little-known navy base it operates in Abu Dhabi

1/ One thing about commodities that increasingly frustrates me is the constant government hyperventilation whenever energy gets tight and prices rise disproportionately. It’s as if cheap energy is a basic human right. Well, it isn’t. 2/ The entire point of a commodity price is to balance supply and demand — every day, in real time. If we don’t have enough diesel, the price must rise until somebody at the margin consumes less, somebody produces more, or another barrel gets pulled in from somewhere else. The price is the invisible hand doing the heavy lifting. Suppress that signal and you don’t solve the shortage. You make the adjustment mechanism worse. Having such a signal available worldwide is the magic: a market price is an extraordinarily efficient mechanism for compressing dispersed information and coordinating behaviour without anybody needing to possess all that information. A diesel price incorporates, in one number, millions of changing facts: refinery outages, crude availability, freight cost, inventories, weather, demand, alternative fuels, storage economics, credit, geopolitical risk, and what every buyer and seller is willing to do at the margin. 3/ Yet whenever the signal becomes politically uncomfortable, governments attack the signal instead of the shortage. The US considers diesel export restrictions. Poland proposes a windfall tax and fuel-price intervention. Britain introduced its windfall tax in 2022. The EU followed with its “solidarity contribution.” Different instruments. Same reflex: prices are high, therefore punish the price mechanism or the companies responding to it. 4/ Take a US diesel export ban or quota. Sure, it could reduce US diesel prices in the short run. Then the second-order effects begin. If US diesel inventories build because refiners cannot export the surplus, refining economics deteriorate and refiners have an incentive to reduce runs. But a refinery doesn’t produce only diesel. It produces gasoline, jet, naphtha, LPG and other products from the same crude barrel. Congratulations: you “fixed” diesel and may have tightened something else. Meanwhile Brazilian farmers get the bill. 5/ Poland’s conservative government is now playing the same Marxist nonsense game. It already capped fuel prices this summer and is now proposing a windfall tax. How does confiscating refining profits create one additional barrel of refining capacity? It doesn’t. If anything, you are taxing precisely the economic signal telling refiners and entrepreneurs: WE NEED MORE CAPACITY. 6/ And this is the particularly absurd part in Europe. For decades Europe made building and operating refining capacity progressively less attractive while simultaneously encouraging diesel consumption. Then a global refining shock arrives, diesel cracks explode, and politicians discover — astonishingly — that Europe doesn’t have enough diesel. Their solution? Punish the remaining refiners for the shortage. 7/ How about doing the opposite? Give the industry a fast-track permitting regime for major refinery expansions. Make strategic capacity an explicit energy-security objective. If necessary, provide cheap, long-duration financing tied directly to incremental capacity. Poland could also build a much larger strategic crude reserve, available to domestic refiners during genuine supply emergencies under transparent rules, with any subsidised crude value contractually passed through to consumers. 8/ None of that lowers diesel prices tomorrow. That’s precisely the point. You cannot legislate a refinery into existence tomorrow. But you can make damn sure the capacity exists when the next shock arrives. The OECD oil market has an extraordinary ability to correct shortages and gluts through substitution, arbitrage, inventories, changing refinery runs and ultimately new investment. But only if politicians allow prices to do the work…! Not difficult to understand. @donaldtusk @sikorskiradek

Diesel has completely decoupled from crude. Since the strike on Iran in late February, low-sulphur gasoil went from tracking Brent almost 1:1 to trading at nearly double it now above $200/barrel equivalent while Brent sits around $110. Crude got cheaper through the summer; diesel never really followed it down and it's now ripping higher again into autumn. image source: FT themerchantsnews.substack.co…

Europe: I need diesel. Russian refinerines are still getting attacked, Middle East refineries still not at full capacity. Please help. US: Diesel markets are global man, I need to take care of my prices too. Europe: Ok anyone else? Asia??? India: Arbs are open, I am on it. US is the biggest diesel exporter of the world though, my volumes are going to be band aid only. China: *radio silence* The rest of Asia: Margins need to make it work. Currently still not yet. Europe: Ok then, I will max out my own refining kit in the meantime. Saudi: We have a problem. #oott

Here u r. JPM on oil. Gotta respect her guts, what's the point of modeling this mess? The entire board can literally flip in a day. #oott #iran