Oil-Fixing Probe Accelerates as EU Asks Traders for Help
The investigation into possible oil-price fixing gathered pace as trading houses from Glencore Xstrata Plc, the $70 billion mining firm, to Gunvor Group Ltd. were asked to provide information to European regulators.
Glencore Xstrata, Gunvor and Vitol Group, which aren’t under investigation, along with other firms with offices in Switzerland, are assisting the European Commission with the inquiry, said three people familiar with the situation, who asked not to be identified because the matter is private. The commission announced last week that it’s probing whether oil companies colluded to distort prices.
“The circle gets bigger,” Craig Pirrong, director of the University of Houston’s Global Energy Management Institute, said yesterday by phone. “The more records they ask for, the more records they get and the more firms that might get caught up in this. We’re talking about a substantial fraction of the world oil trade being involved here.”
The probe of potential abuse in the energy market is the third into global benchmark prices in the past year and follows investigations into the London interbank offered rate, or Libor, and ISDAFix, the benchmark for the $379 trillion swaps market. Royal Dutch Shell Plc (RDSA), BP Plc (BP/) and Statoil ASA (STL) are targets of the latest inquiry into whether prices of crude, refined oil products and biofuels were manipulated, potentially harming consumers. Platts, a price assessor, was also questioned.
Spokesmen for Baar, Switzerland-based Glencore Xstrata, Geneva-based Vitol and Gunvor, and competitors Mercuria Energy Trading SA, also of Geneva, and Amsterdam-based Trafigura Beheer BV, either didn’t return calls seeking comment or declined to discuss the matter because of company policy.
Antoine Colombani, a spokesman for the Brussels-based commission, declined to comment when contacted by Bloomberg News today.
Platts, which is owned by McGraw Hill Financial Inc. (MHFI), publishes benchmark prices that are used to determine the costs refiners pay for crude and distributors pay for diesel fuel and gasoline. Traders report some transactions to Platts. Those deals, rather than a complete record of all trades, are used to determine the price.
Total SA (FP), Europe’s third-biggest oil company, has estimated that as much as 80 percent of all crude and oil-product transactions are linked to reference prices such as those published by Platts, while as much as 20 percent are linked to exchange-traded futures on the New York Mercantile Exchange and ICE Futures Europe.
Platts’s North Sea Dated Brent benchmark sets the price of half the world’s crude, from Canada to Australia. Its kerosene assessments are used by the airline industry, where fuel accounts for about a third of operating costs. In the biofuels markets, the company assesses the price of ethanol and biodiesel as well as ethyl tert-butyl ether, an additive that’s used in gasoline production.
Shell is “fully co-operating” with the EU’s inquiry, Chief Executive Officer Peter Voser said at the company’s annual general meeting in The Hague today.
“It’s important to bear in mind at this stage it’s just an investigation into facts and evidence, and no adverse finding has been made,” Voser said.
The widening of the EU’s request for information to trading companies was reported earlier yesterday by the Financial Times.
“Oil gets regulators’ attention because trading is extremely complicated and not at all transparent, while the price of crude is something that affects everyone,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said by phone.
Pannonia Ethanol, a Hungarian biofuel producer, said on May 16 it lodged a complaint with the commission last year after Platts denied requests to contribute to its price-setting process.
Neste Oil Oyj (NES1V), Finland’s only refiner, said on May 16 it was asked to provide information regarding the inquiry and is not a target of the investigation. Eni SpA, Italy’s largest oil company, has received a request for information but isn’t under investigation, a spokeswoman said last week.
Separately, a preliminary bond prospectus dated May 10 obtained by Bloomberg News showed a subsidiary of Gunvor was served a subpoena by the U.S. Attorney’s Office for the Eastern District of New York in April 2011 for documents relating to its oil-trading activities.
Castor Americas Inc., a Delaware-incorporated member of the group, and three of its staff received subpoenas, according to the prospectus. A Gunvor employee was also served. Peter Carr, a spokesman for the U.S. Justice Department, declined to confirm or deny that an investigation is ongoing.
Gunvor is closely held by billionaires Gennady Timchenko and Torbjorn Tornqvist, and doesn’t regularly disclose its financial information. While the Justice Department “has not served any additional subpoenas to any companies or employees of Gunvor, Gunvor continues to cooperate,” according to the prospectus.
Seth Pietras, a Geneva-based spokesman for Gunvor, declined to comment on the subpoenas when contacted by telephone yesterday. Gunvor acquired Castor in 2009.
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