SemGroup Collapse May Have Had Role in Oil's Decline, WSJ Says

By [bn:PRSN=1] Jeran Wittenstein []

July 23 (Bloomberg) -- SemGroup LP, a Tulsa, Oklahoma-based oil trading company that declared bankruptcy yesterday, may have contributed to the decline of oil prices in the past 10 days, the Wall Street Journal reported, citing industry experts.

Before bankruptcy, SemGroup took short positions, or bets that oil prices would fall, as part of its hedging strategy, the newspaper reported, citing a bankruptcy court affidavit. When prices rose, SemGroup covered those bets by taking out equivalent long positions that oil would rise, the Journal said.

After SemGroup couldn't put up collateral for its bets, the company sold its futures account to Barclays Capital on July 16, the report said, citing the affidavit. SemGroup's exit removed ``upward momentum'' from the market, the newspaper said, citing Edward Meir at futures broker MF Global Ltd.

Others say SemGroup's buying stopped long before July 16, near the time oil prices began declining, the newspaper said, citing unidentified traders. Officials representing SemGroup were not immediately available when contacted by Bloomberg News after business hours.

To contact the reporter on this story: Jeran Wittenstein in San Francisco at jwittenstei1@bloomberg.net.