* 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 pricemanipulation by Arcadia Petroleum, Parnon Energy and two oiltraders in early 2008 had no factual support, a lawyer for thedefendants told a judge on Wednesday, but their accusers cited apotentially damaging email.
The traders have been accused of using a combination ofcontracts for physical oil futures to manipulate the market foroil at the key U.S. hub of Cushing, Oklahoma, including inJanuary, March and April 2008.
The class action, consolidating several lawsuits by otheroil traders, is the second faced by traders Nicholas Wildgooseand James Dyer and the companies, which are owned by Norwegianbillionaire John Fredriksen.
In April, U.S. District Judge William Pauley, who is hearingboth cases, denied a motion to dismiss similar allegations bythe U.S. Commodity Futures Trading Commission regulator.
A lawyer for the plaintiffs, who brought a class action inManhattan federal court last year, cited a September 2007 emailby one of the traders saying there was a "shitload of money tobe 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," theplaintiff's lawyer, Warren Burns, told the judge during oralarguments over Arcadia and Parnon's bid to dismiss thelitigation.
The lawsuit said Dyer's 2007 email explained that the marketwould first need to believe that crude oil supplies at Cushingwere low so prices would rise. The email also said someone wouldhave to unexpectedly turn the end-of-the-month balance into asurplus.
The traders dumped barrels back on to the market, causingprices to crash and racking up profits from short positions theyhad accrued in futures markets, the lawsuit said.
The defendants' lawyer, Timothy Carey, argued in court onWednesday that the complaint "has no support of factualallegations that could lead to liability. On that basis alone,the complaint should be dismissed."
Carey said the plaintiffs had also failed to make theirclaim that the traders intended to monopolize the crude oilfutures market at Cushing.
The judge did not make an immediate ruling on the arguments.Among the questions he asked were whether "there was intent tomonopolize or make a whole bunch of money?" and "can youmonopolize something for just a couple of days?"
The case is In re: Crude oil commodities futures litigationin U.S. District Court for the Southern District of New York,No. 11- 03600
(Editing by Edwina Gibbs)
Keywords: OIL FUTURES/LAWSUIT