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UPDATE 2-Europe oil probe seeks market abuse evidence in 2010-2013
May 21, 2013 / 3:41 PM / 5 years ago

UPDATE 2-Europe oil probe seeks market abuse evidence in 2010-2013

* Commission sends list of questions to market participants

* Seeks discrepancies between prices submitted to Platts and actual deals (Adds list of requests for information from Commission)

By Dmitry Zhdannikov and Peg Mackey

LONDON, May 21 (Reuters) - The European Commission is asking oil traders across the continent to provide evidence of market abuse to determine whether companies sought to manipulate prices reported to leading price-setting agency Platts.

Authorities last week raided the London bureau of Platts and the offices of oil majors Statoil, Royal Dutch Shell and BP in the biggest cross-border action since the probe into rigging of Libor benchmark interest rates. A small niche trading house in the Netherlands is also part of the probe.

At issue is whether there was collusion to distort prices of crude, refined oil products and biofuels traded during the Platts market-on-close (MOC) system - a daily half-hour “window” in which it sets prices.

The Commission is seeking information from market participants - including top trading houses Glencore and Vitol, European major Eni and Finnish refiner Neste - that refer to the 2010-2013 period and must be answered by the end of May, said two senior oil executives who requested anonymity.

“They are casting the net very wide with a set of reasonably good questions to establish how the market works,” said a senior trading source.

“The biggest risk in energy markets in general is if someone is abusing its dominant position. I think this investigation comes down precisely to this.”

The opening letter says the Commission is trying to identify whether one or more companies have been prevented from joining Platts’ MOC process.

The key question on the list, the sources say, is whether there is any proof of major discrepancies between bids and offers submitted to Platts and actual deals done in the market, trading sources said.

“There is a lot of tension between different trading companies, so this questionnaire could generate interesting results,” said the senior trading source.

Platts, a unit of McGraw-Hill, provides clients with price benchmarks set by reporters for opaque energy markets. Its assessments are used to close physical and derivative deals worth billions in a $2.5 trillion market.

A summary of the Commission’s request is as follows:

* Give a short description of your company

* How are your trading operations organised

* What are the most important activities of your business and the countries in which you are active

* Does your company belong to a group of companies

* Are you a subscriber to Platts

* Has your company experienced a situation when Platts’ prices were not a true reflection of the market

* Has it ever happened that a company’s bids/offers/trades reported by a market player to Platts did not reflect the prices it told you on the same day

* Are you part of Platts window and does your company have records of all dealing in Platts’ window from 2010-2013

* What proportion of your company’s deals are done through Platts and outside it

* Does your company have experience of interaction with Platts with regard to acceptance of new players into the MOC process

* Have you ever asked Platts to correct a published price

* Please make sure you mention which information constitutes corporate secret.

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.

Over the past year many observers have noted the resemblance between the Libor self-reported benchmark and the journalist assessment-based methodology used to set most of the world’s oil prices, but the investigation is the first indication that EU authorities are taking a harder look at the system.

“We still don’t know what has triggered this enquiry,” said a senior oil executive. “It’s generating a lot of internal work, but we’re putting things together and will respond.”

Hungary’s Pannonia Ethanol, a recent entrant to Europe’s market, was the first company to identify itself as having complained to Brussels over access to the Platts window.

Platts says trading in the oil market has not been significantly affected by the investigation.

Thomson Reuters, parent of Reuters news, competes with Platts in providing news and information to the oil market. (Editing by James Jukwey)

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