Mercuria Energy Group Ltd. and Hess Corp. (HES)’s oil trading businesses were added to a lawsuit claiming they conspired with companies including BP Plc (BP/), Statoil ASA (STL) and Royal Dutch Shell Plc (RDSA) to manipulate Brent crude oil prices.
A group of investors suing over the alleged manipulation filed a new complaint in Manhattan federal court, where more than a dozen suits are concentrated. In addition to widening the alleged conspiracy to include the Mercuria and Hess entities, the investors identified what they claim are “wash trades” and other illegal transactions that aimed to move the market.
Morgan Stanley (MS) and energy traders including Vitol Group are also named in the suit. The investors claim the conspiracy spanned more than a decade. The North Sea oil benchmark is used to price more than half the world’s crude and helps determine the costs for fuels including gasoline and heating oil.
“By providing false or inaccurate information and engaging in false or sham trading, defendants undermined the entire pricing structure for the Brent crude oil physical and futures markets,” the investors said in the new complaint filed April 28.
The Hess entity, New York-based Hess Energy Trading Co., or Hetco, is a joint venture established in 1997 between Hess and two former Goldman Sachs Group Inc. (GS) traders. Hess is part-owner and full guarantor of the business, which is a market maker for Brent and other crudes. Hetco is a subsidiary of Hess Corp., according to its website.
Jerry Jeske, a spokesman for Mercuria, declined to comment on the new allegations. Patrick Scanlan, an outside spokesman for Hetco with Sard Verbinnen & Co., declined to comment on the case.
Hess plans to sell its Hetco stake, according to filings, as part of a plan to shed trading, refining and marketing businesses to become a pure exploration and production company.
Mercuria Energy Trading SA and Mercuria Energy Trading Inc. are units of Geneva-based Mercuria Energy Group Ltd., the fourth-biggest independent commodity trader. Mercuria agreed in March to buy JPMorgan Chase & Co. (JPM)’s physical commodities business for $3.5 billion. In a March 19 statement, JPMorgan said the all-cash sale was expected to close in the third quarter of this year.
The investors claim that the oil companies and traders submitted false information to Platts, an energy news and price publisher whose quotes are used by traders worldwide. Platts isn’t named as a defendant in the case.
The defendants also made trades intended to trick Platts into recording inaccurate prices. Among the phony trades were so-called “wash trades,” in which parties engage in offsetting transactions intended to influence the market with no net change in the traders’ positions.
According to the complaint, the defendants were the major participants in the Brent crude market during the time when the alleged price manipulation took place. The investors claim they were forced to pay artificial prices for Brent crude oil futures and derivatives. They’re seeking unspecified damages, which may be tripled under U.S. antitrust law.
The multidistrict litigation is In Re North Sea Brent Crude Oil Futures Litigation, 13-md-02475, U.S. District Court, Southern District of New York (Manhattan).
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