European Commissions investigation into possible oil pricing manipulation is widening its circle as trading houses from Glencore Xstrata PLC, a $70 billion firm, to Gunvor Group Ltd. and Vitol Group were asked to assist European regulators by providing information. The three trading houses along with other companies with offices in Switzerland arent been investigated, but have agreed to assist according people familiar with them.
Craig Pirrong, director of the University of Houston’s Global Energy Management Institute said last week: “It’s likely that this will metastasize. A lot will depend on what happens when they start looking through e-mails, texts and IMs, because these companies are talking to other market participants and the circle could widen relatively quickly.” Yesterday he said by phone for Bloomberg: “The circle gets bigger. The more records they ask for, the more records they get and the more firms that might get caught up in this. We’re talking about a substantial fraction of the world oil trade being involved here.”
Royal Dutch Shell, BP, Statoil – three of Europes biggest oil producers, and Platts – the oil-price data collector owned by McGraw Hill Financials Inc., were the first four companies to come under scrutiny by the European regulators. They were followed by Neste Oil Oyj, Finland’s only refiner. Later last week information was published that a Hungarian biofuel producer, Pannonia Ethanol, was the first company to announce it had filed a complaint against Platts in reference to the procedure, which the pricing agency uses to vet new companies before permitting them to participate in the pricing mechanism.
Andrey Kryuchenkov, an analyst at VTB Capital in London said by phone for Bloomberg: “Oil gets regulators’ attention because trading is extremely complicated and not at all transparent, while the price of crude is something that affects everyone.” Platts publishes benchmark prices, which are used to determine what refiners should pay for crude and what distributors costs for gasoline and diesel fuel should be. It also estimates kerosenes price for the airline industry, where fuel is one of the biggest operating costs. The companys North Sea Dated Brent benchmark sets the price of half the worlds crude. And in the biofuel market the company assesses the price of biodiesel, ethanol and ethyl tertbutyl, an additive used in gasoline production.
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