* BP, Shell, Statoil say cooperating with investigation
* Involves price assessment by reporting agency Platts
* Statoil says may involve pricing since 2002
By Peg Mackey and Nerijus Adomaitis
LONDON/OSLO, May 14 European authorities have
raided offices of oil majors Shell, BP and Statoil in an
investigation of suspected manipulation of oil prices, one of
the biggest cross-border actions since the Libor rigging
Authorities have sharpened scrutiny of financial benchmarks
around the world since slapping large fines on some of the
world's biggest banks for rigging interest rate benchmarks.
On Tuesday, the European Commission said it was
investigating major oil companies over suspected
anti-competitive agreements related to submission of prices to
leading oil pricing agency Platts, a unit of McGraw Hill Group
"Officials carried out unannounced inspections at the
premises of several companies active in and providing services
to the crude oil, refined oil products and biofuels sectors,"
the Commission said. The inspections took place in two EU member
states and one non-EU country, it said.
"The Commission has concerns that the companies may have
colluded in reporting distorted prices to a price reporting
agency to manipulate the published prices for a number of oil
and biofuel products," it said.
The Commission also said companies may have prevented others
from participating in the price assessment process, with a view
to distorting published prices.
Statoil said the suspected violations were related to the
Platts price assessment process and may have been ongoing since
The probe will shine a light on the methodology designed by
Platts for daily assessments on the physical oil markets, used
to close deals worth billions of dollars.
The so-called Platts window, or market-on-close (MOC)
system, is a daily half-hour period in which it determines cash
prices through a series of bids, offers and trades.
Critics say the system is only a snapshot of the market,
because it excludes trade outside the window - one reason that
it can be vulnerable to manipulation.
"I remember looking at these sorts of issues 10 years ago,
and nothing has changed, it's sort of an accident waiting to
happen," said Craig Pirrong, Professor of Finance at the
University of Houston, noting that after the Libor scandal,
price assessment agencies were under "incredible scrutiny."
"Regulators and law enforcement officials are quite upset
with this sort of alleged conduct and they have proven that they
are willing to go after companies that misreport for very large
sums of money," Pirrong said.
"Potentially the exposure is quite large."
The Commission said that even small distortions of assessed
prices may have a huge impact on the prices of crude oil,
refined oil products and biofuels purchases and sales,
potentially harming final consumers.
It added the fact inspections had been carried out did not
mean the companies were guilty of anti-competitive behavior.
The Commission did not make clear whether it was
investigating a specific incident. These investigations
typically take years to draw final conclusions.
Platts, Royal Dutch Shell, BP and Statoil
said they were cooperating with the probe.
French major Total said there had been no
inspections at its offices. The Commission did not list the
companies being investigated, and it was not clear whether other
companies were included.
Statoil said authorities had inspected its office in
Stavanger on the request of the European Commission on
suspicions of anti-competitive behavior.
The Norwegian state, the controlling shareholder of Statoil,
said the probe was a matter for the company's management to
handle and declined further comment.
Platts said the European Commission had "undertaken a review
at its premises in London this morning in relation to the Platts
price assessment process".
The International Organization of Securities Commissions
(IOSCO) is running a wider review of benchmarks, and the U.S.
Commodity Futures Trading Commission is looking into the setting
of gold and silver prices in London.
IOSCO said it was not involved in the oil enquiry. The CFTC
declined to comment, and the Federal Trade Commission had no
Thomson Reuters, parent of Reuters news, competes
with Platts in providing news and information to the oil market.