Danish firm may sink on unit’s alleged fraud
Print Edition
TRADERS and shipping companies scrambled to source fuel and take over supply contracts yesterday after Danish marine fuel supplier OW Bunker said a suspected fraud at its Singapore subsidiary had pushed it to the brink of bankruptcy.
The alleged fraud at Singapore-based Dynamic Oil Trading is potentially one of the biggest financial market scandals to hit the city state since 2004, when China Aviation Oil (Singapore) ran up oil futures losses of US$550 million.
Denmark’s Berlingske newspaper cited OW Bunker chairman Niels Henrik Jensen as saying Dynamic’s head Lars Moller and some of his colleagues arrived unexpectedly at OW Bunker headquarters in Norresundby, Denmark, this week and explained the situation to Chief Executive Jim Pedersen.
“What we know is based on his own testimony,” Berlingske quoted Jensen as saying. Danish state television, citing unnamed sources, said Dynamic’s management denied any involvement in fraud.
Moller could not be reached for comment at Dynamic’s office in Singapore yesterday, and no one was present at his home in a luxury condominium.
OW Bunker, Denmark’s third- largest company by revenue, said on Thursday that investors needed to assume the company’s equity has been wiped out due to possible losses at Dynamic of around US$125 million.
The company did not give any details of the alleged fraud, but several traders said the problem was likely related to the recent sharp fall in oil prices.
Benchmark Brent crude oil futures have dropped almost 30 percent in value since June to levels last seen in 2010 as rising supplies clash with cooling demand.
“I assume they were very long on their hedges so suffered losses when oil prices came down,” said one trader who has had counterparty positions with OW Bunker.
Taking a long position requires an investment into a product, such as oil, benefiting from rising prices, meaning that a trader with a long position makes a loss if prices fall.
The company, whose shares have been halted, said it had fired its head of risk management.
OW Bunker is estimated to have about 7 percent of the global market for bunker, a liquid fuel refined from crude oil and used to power ships, competing with companies such as World Fuel Services Corp, Chemoil Energy and Aegean Marine Petroleum Network.
Traders said refineries and other shipping fuel suppliers were cutting deliveries and likely to cancel long-term contracts with the Danish company.
Yesterday at Dynamic’s office in Singapore, trading desks were largely empty while the few staff who were present said they were waiting for instructions from headquarters.
Singapore Police’s Commercial Affairs Department declined to comment on whether they were investigating.
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