Impact of new rules on physical commods seen limited

Tue Apr 24, 2012 11:21am EDT

* New rules set to be "relatively benign" - Glencore

* Traders say more transparency is difficult, unnecessary

By Emma Farge

LAUSANNE, Switzerland, April 24 (Reuters) - Efforts to increase regulation of physical trade in commodities such as oil are unlikely to have a big impact on business in this traditionally opaque sector and would be hard to implement, top trading house executives said on Tuesday.

Regulatory initiatives on commodities trading have mostly focused on futures and derivatives, but non-governmental organisations are also calling for stricter rules on disclosure for physical commodities deals.

"I have to say I think the potential for regulation in physically traded markets is relatively benign," Alex Beard, Glencore's head of oil, told an FT commodities conference.

"I can't see a move to a full-blooded trade regulation of physical commodities in the future."

Oil traders buying from national oil firms could face new disclosure rules within a year if measures being discussed by Norwegian non-governmental organisation the Extractive Industries Transparency Initiative (EITI) come into force.

EITI's stakeholders include oil traders such as Glencore and oil-producing countries including the United States.

It is relatively rare for oil traders to buy directly from oil producers, although these measures could in theory take effect for those working in countries like Nigeria and Libya.

Other executives for Swiss-based energy traders such as Gunvor and TOTSA, the trading arm of French major Total , saw no immediate need to improve transparency of physical commodity transactions.

"I don't see any reason why you should regulate trade. It would be very difficult to regulate every transaction as every transaction is unique," said Torbjorn Tornqvist, chief executive of Gunvor.

"Overall, the market has taken quite good care of this transparency issue," said the president of oil trading at TOTSA, Pierre Barbe.

Non-governmental organisation Revenue Watch is calling for full disclosure of price, volume and crude oil grade for every cargo of oil sold from exporting countries.

Barbe said that his firm would comply with transparency measures if national oil firms required it.

"We have our own secrets and we don't have to display all our sales of physical oil where we produce oil for instance from our field," he said. "It's a matter between us and the host country ...it's not for others to know," he said.