Dealers who rigged oil price banned

TWO City oil traders have been fined a total of £150,000 and banned from dealing after manipulating prices on the £1.5bn-a-day London International Petroleum Exchange, it has been revealed.

David Palmer and David Smith had to pay £90,000 and £60,000 respectively and were suspended from trading for two months. After an internal investigation, they admitted making personal profits by manipulating the price of the Brent Crude oil future, the benchmark contract used to set the world's oil price.

The Exchange attacked this as 'conduct liable to bring the Exchange into disrepute'. The pair, members of a group of freelance traders known as 'locals', would have bought the Brent Crude contract heavily to drive up its price, which is based on dealing volumes. Locals, who wear brightly coloured jackets and shout details of trades at each other across a trading 'pit', deal using their own money.

The exchange said the fines were proof that it took allegations of misconduct seriously and acted swiftly to counter wrongdoing. It refused to say whether it was looking at other cases of market manipulation - but critics insisted that the fines and bans showed that the practice was rampant.

Chris Cook, the former head of market supervision at the Exchange, has been waging a personal campaign to change how oil futures are traded there. He has complained to the Financial Services Authority, the US Justice Department and New York State attorney-general Eliot Spitzer.

But the FSA has told Cook that a member of the Exchange must make a complaint before it can take any action. Palmer and Smith, who refused to comment, are back at work after their two-month ban.