The European Commission is turning to oil traders for evidence that would indicate if companies were seeking to fix oil prices that were reported to Platts, a leading price-setting agency. In addition to sending oil traders a list of questions, regulators are also taking a closer look at oil companies’ trading units, which they say are lagging behind traders in terms of disclosure of information.
Last week the EC raided a number of major oil companies, including Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B), BP plc (NYSE:BP) (LON:BP) and Norwegian oil giant Statoil ASA (NYSE:STO). Regulators are trying to determine whether oil companies and traders were collaborating in order to manipulate the prices of oil, oil products and biofuels during the Platts market-on-close system. That system is a half-hour period of time every day when the agency sets prices.
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Oil prices came under scrutiny by European regulators in the wake of a string of fines levied on top European banks for Libor fixing. Earlier this week, U.S. Sen. Ron Wyden asked the Department of Justice to take part in the oil price investigation that’s being conducted in Europe.
Regulators Focus On Trading Desks
This morning Reuters’ Dmitry Zhdannikov and Claire Milhench report that trading desks at oil companies are coming under scrutiny for the first time. Regulators have looked at banks, commodities markets and trading houses much more closely after the Libor fixing scandal, although the trading desks at big oil companies were largely ignored.
Trading firms have been considered to be the most secretive within the oil industry, although within the last few years the largest firms in the world like Mercuria, Gunvor, Vitol and Glencore have all begun releasing more detailed information about their financial positions.
However, oil companies like Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B) and BP plc (NYSE:BP) (LON:BP) don’t disclose very much information. According to Reuters, BP last released financial information specifically for its trading unit in 2005.
Trading units at oil companies typically have massive turnover and staff members whose appetites for risk are much higher than those of staff members at the largest banks on Wall Street. They also say that even though there are disclosure requirements for oil companies that are listed publicly, basic information like profit and revenue specifically from the companies’ trading units is not made public.
EC Sends Questions To Europe’s Top Trading Houses
On Tuesday Reuters Dmitry Zhdannikov and Peg Mackey reported that regulators sent a list of questions to a number of the biggest trading houses, including Vitol, Glencore, NESTE OIL (OTCMKTS:NTOIF) and Enersis S.A. (ADR) (NYSE:ENI) (BIT:ENI). The questions are related to a period of time starting in 2010 and running into this year. Two senior executives within the oil industry said the trading houses must submit their answers to regulators by the end of this month.
One of the main questions that was said to be on the list was whether there’s proof of big differences between companies’ bids and the offers that were submitted to Platts and the deals that were actually done within the market.