Oil Traders Spared as EU Commission Drops Price-Rigging Probe

  • BP, Shell and Statoil no longer focus of EU Investigation
  • EU to focus on potential manipulation of ethanol market

The European Commission dropped an investigation into the potential manipulation of oil price benchmarks, signaling crude producers and their trading arms won’t face fines like those that roiled banks accused of rigging currency markets and lending rates.

The trading units of Royal Dutch Shell Plc, BP Plc and Statoil ASA, whose offices were raided in May, 2013, are no longer under investigation nor is the commission currently probing “behaviors in price benchmarks for the crude oil sector,” Ricardo Cardoso, a spokesman for the European Union’s antitrust authority, said by e-mail.

The end of the investigation brings relief to players in the oil trading sector who feared similar crackdowns to the penalties on banks that rigged other benchmarks including the London Interbank Offered Rate or Libor. EU antitrust regulators levied 1.7 billion euros ($1.8 billion) in fines in 2013 over Libor manipulation.

“It was a big potential monetary exposure but also potential criminal exposure for some of these people,” said Craig Pirrong, a finance professor at the University of Houston. “The oil benchmark is certainly the most important commodity benchmark and that would have pretty much touched every major firm. So this is good news for them.”

2013 Raids

Raids on Shell, BP, Statoil and price publisher Platts in May 2013 over suspected benchmark rigging echoed probes into banks for trying to fix the Libor and foreign exchange markets. The end of the investigation deals a blow to those calling for further reforms or regulations of the methods used to set benchmark prices for crude and petroleum products.

Shell, Europe’s largest oil company, said it was “pleased” with the commission’s comments on the crude investigation. “We expect our employees to comply with all applicable laws and regulations and operate to high ethical and professional standards,” a spokesman for the company said.

BP Plc declined to comment on the EU’s decision to drop the probe. Statoil spokeswoman Elin Isaksen said in an e-mail that the raid in 2013 “was a great surprise to us and we are not aware of what led to the inspection being initiated towards Statoil.”

Ethanol Benchmarks

Norway’s state oil company helped investigators facilitate inspections and Statoil is awaiting the results of the probe, she said, adding that there are no formal charges or accusations against Statoil.

The EU is now focusing on ethanol benchmarks, opening a formal investigation on Monday into suspicions Abengoa SA colluded with Alcogroup and Lantmaennen. The trio may have agreed to submit or support bids to push benchmarks up and increase ethanol prices as a result, the commission said in a statement.

While prices for stocks and bonds are set by actual trades on exchanges, benchmarks for oil and petroleum products as well as coal, iron ore, fertilizer, gas and some metals are determined by journalists at agencies such Platts, a unit of McGraw Hill Financial Inc. They establish the prices by collating data on available bids, offers and trades as well as phone and e-mail surveys. Those assessments are often used to determine payments in long-term contracts between commodity buyers and sellers.

In an e-mailed statement, Platts spokeswoman Kathleen Tanzy said, “Platts has not been charged with any wrongdoing and was not an addressee of the EC’s statement of objections in relation to its ethanol pricing investigation.”

Platts price assessment processes are independent and are based on observed transactional data as well as other market information, which are then subject to verification and tested against real market conditions in order to attain relevance, she said, adding that Platts will continue to cooperate with the commission’s review.

Bloomberg LP, the parent of Bloomberg News, competes with Platts and other assessment companies in providing market news and information.

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