Rogue PVM broker costs firm £6.1 million

London Brent crude rose as high as $73.50 a barrel on Tuesday before reversing sharply. Brent crude oil is currently trading around $66.50 a barrel.

A $2 price spike would have cost the world an extra $175 million on oil that day.

Trade sources said PVM started contacting clients on Wednesday saying it was investigating unauthorised trades by a rogue broker.

"I heard it from a PVM broker this morning. They called one of their own 'rogue' and said the broker lost money," said a Singapore-based trading source, who asked not to be named.

Trading activity in Brent crude oil surged suddenly just before 3 a.m. British time on Tuesday, surprising traders accustomed to very small price moves during the relatively quiet Asian hours.

More than 16 million barrels of Brent crude oil traded in the space of just over an hour, Reuters exchange data showed, unprecedented for a market that typically trades less than 1 million barrels before Europe opens.

Barrels trade in 'lots' of 1,000 barrels a time.

While the action occurred in the paper market, with no barrels of crude physically changing hands, the volume of crude traded during Asian trading was almost double the current daily output of Saudi Arabia, the world's largest oil exporter.

At the time, oil traders said the activity could have been related to end-of-quarter hedge fund positioning.

But traders noted that bidding for large volumes of crude at a time of day when there were few traders in the market appeared illogical and would have unnecessarily inflated the purchase price for the buyer, suggesting either erroneous or ill-advised activity.