* U.S. judge hears oral arguments in New York court
* Class action plaintiffs cite critical Sept. 2007 email
* Case is the second facing traders over early 2008 prices
By Grant McCool
NEW YORK, Oct 10 (Reuters) - A lawsuit claiming oil price manipulation by Arcadia Petroleum, Parnon Energy and two oil traders in early 2008 had no factual support, a lawyer for the defendants told a judge on Wednesday, but their accusers cited a potentially damaging email.
The traders have been accused of using a combination of contracts for physical oil futures to manipulate the market for oil at the key U.S. hub of Cushing, Oklahoma, including in January, March and April 2008.
The class action, consolidating several lawsuits by other oil traders, is the second faced by traders Nicholas Wildgoose and James Dyer and the companies, which are owned by Norwegian billionaire John Fredriksen.
In April, U.S. District Judge William Pauley, who is hearing both cases, denied a motion to dismiss similar allegations by the U.S. Commodity Futures Trading Commission regulator.
A lawyer for the plaintiffs, who brought a class action in Manhattan federal court last year, cited a September 2007 email by one of the traders saying there was a "shitload of money to be made shorting" NYMEX WTI crude oil calendar spreads.
A calendar spread in NYMEX WTI crude oil futures contracts
is a position in two consecutive futures contracts.
"This email underpins every allegation in the case," the plaintiff's lawyer, Warren Burns, told the judge during oral arguments over Arcadia and Parnon's bid to dismiss the litigation.
The lawsuit said Dyer's 2007 email explained that the market would first need to believe that crude oil supplies at Cushing were low so prices would rise. The email also said someone would have to unexpectedly turn the end-of-the-month balance into a surplus.
The traders dumped barrels back on to the market, causing prices to crash and racking up profits from short positions they had accrued in futures markets, the lawsuit said.
The defendants' lawyer, Timothy Carey, argued in court on Wednesday that the complaint "has no support of factual allegations that could lead to liability. On that basis alone, the complaint should be dismissed."
Carey said the plaintiffs had also failed to make their claim that the traders intended to monopolize the crude oil futures market at Cushing.
The judge did not make an immediate ruling on the arguments. Among the questions he asked were whether "there was intent to monopolize or make a whole bunch of money?" and "can you monopolize something for just a couple of days?"
The case is In re: Crude oil commodities futures litigation in U.S. District Court for the Southern District of New York, No. 11- 03600
(Editing by Edwina Gibbs)
Keywords: OIL FUTURES/LAWSUIT