GLEN Glencore Plc

By Aruna Viswanatha 

A former oil trader at mining company Glencore PLC pleaded guilty Wednesday to conspiring to manipulate fuel prices, in a case that signals a new front in a long-running crackdown by prosecutors on efforts to improperly steer oil trading benchmarks that influence real-world prices.

Appearing via videoconference from his lawyers' offices in California, the ex-trader, Emilio Jose Heredia Collado, admitted to allegations that accused him of working to manipulate an oil-price benchmark by directing other traders to submit orders that would push prices in the direction he wanted. "Guilty," Mr. Heredia said when asked how he wished to plead to the one count of conspiracy that prosecutors had charged him with. The case against Mr. Heredia related to trading through a process managed by oil-price benchmark publisher S&P Global Platts.

At the brief Zoom hearing before U.S. District Judge Charles Breyer in San Francisco, Assistant U.S. Attorney Matthew Sullivan said that Mr. Heredia was cooperating in the government's ongoing investigation.

He faces up to five years in prison, but he could face less than that if the government determined he had offered substantial assistance, the judge noted. Prosecutors said Mr. Herdedia, 49 years old, worked to engineer benchmark prices between 2012 and 2016 that would improve the profitability of other transactions in physical fuel oil.

The case echoes claims previously investigated in Europe and targets conduct first revealed by The Wall Street Journal in 2013, in an article that showed traders admitting they could manipulate prices on the Platts system.

A Glencore spokesman said previously the company has cooperated with the continuing federal investigation, and S&P Global Platts has said it maintains a transparent methodology that allows it to publish assessments that reflect market value.

Trades made during the daily "Platts window" -- the final 30 to 45 minutes of trading -- are reported by traders to Platts editors, who determine a value at the end of the day.

The Justice Department's fraud section, which is prosecuting Mr. Heredia, has steadily stepped up its oversight of commodity trading and other markets that were lightly policed and mostly unregulated until the 2008 financial crisis. The allegation that traders manipulated a reference price in global oil markets mirrors those in past cases finding that bank traders colluded to rig interest-rate and foreign-exchange benchmarks.

Benchmark prices in the physical oil market are derived from information volunteered by traders, since trading is done in private and buyers and sellers aren't required to publicly report prices. The benchmarks are then used around the world to set prices for other purchases and sales of physical oil.

In one example cited by prosecutors, Mr. Heredia in 2016 directed a co-conspirator to submit offers to Platts during the pricing window for a low-grade fuel known as "bunker" at the port of Los Angeles. The other trader subsequently lowered the price more than 40 times to push down the Platts benchmark, according to prosecutors.

The goal was to lower the price so the company could buy fuel oil more cheaply from another firm, prosecutors wrote in their charging document.

The activity had the effect of moving down the price from an average of $245 a metric ton to a final price of $204.50 a metric ton, "resulting in an unlawful gain of hundreds of thousands of dollars" for his employer, prosecutors said.

Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com

(END) Dow Jones Newswires

March 24, 2021 19:34 ET (23:34 GMT)

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