Platts Oil-Price System Prone to Collusion, EU Official Says

Platts’s oil-price reporting system “could be prone to collusion or distortion,” according to the European Union official in charge of the benchmark probe that led to raids on the premises of BP Plc, Royal Dutch Shell Plc and Statoil ASA.

“The mere set up could be prone to collusion or distortion because it doesn’t take much to basically have strange reporting” by companies that participate in the pricing system, Celine Gauer, director at the European Commission’s antitrust unit for the energy industry, said today at a conference in Brussels.

It takes at least a year to review all the documents garnered during and after raids in cases such as the oil probe if the commission plans to open a formal investigation, Gauer said in an interview. Reviewing documents can go faster if the EU decides not to open a formal probe, she said, emphasizing that her comments today were in a personal capacity.

The commission also raided the premises of Abengoa SA and Argos Energies in May looking for evidence in relation to the markets for crude oil, refined oil products and biofuels. Gauer’s comments come after four longtime traders in the global oil market said in a U.S. lawsuit that the prices for buying and selling crude are fixed.

‘Robust’ Process

Platts’s “oil-price assessment process is robust and specifically designed to safeguard against distortion, requiring that any data submitted for consideration is in line with the market, that any bids or offers are firm, transactable and verifiable and move incrementally in step with the market,” Kathleen Tanzy, a spokeswoman for the company in New York, said in an e-mail.

“Any data out of line with the market will not be considered in the final assessment,” she said. “Platts has not been charged with any wrongdoing and we are not aware of any evidence that our assessments are not reflective of true market value.”

The EU probe is still examining two areas of concern -- abuse of dominance and unlawful collusion, Gauer said.

“None of the two avenues is closed yet because we are simply looking at the material” gathered during the investigation, she said.

Instant Messages

Platts has assessed prices for crude oil, petroleum products and related swaps using its market on close process since 2002 in Europe. Traders voluntarily report bids, offers and trades to Platts through e-mails, instant messages and phone conversations in a defined window period each day, which are then used to create end-of-day price assessments for various commodities, including crude oil and ethanol.

“Very often you see that it is not that many transactions or bids and offers that are reported on a day-to-day basis,” Gauer said. “On the basis of these trades, Platts develops independently, or so it seems, its price benchmark.”

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