BP Targeted with Shell and Statoil in EU Oil Price Fixing Probe

on May 15, 2013

Three of the biggest European oil explorers – UK-based BP (LON:BP, NYSE:BP), the Hague-based Royal Dutch Shell (LON:RDSA, LON:RDSB, LON:RDS.A, LON:RDS.B) and Norway’s Statoil ASA (NYSE:STO) – are among the companies investigated by the European Commission over potential oil price manipulation. The share prices of BP and Shell fell in London and New York on Tuesday, May 14 after details of the investigation were announced.

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**European Commission Raids Energy Giants’ Offices**
On Tuesday, European Commission officials raided the offices of BP and Shell, where their trading divisions are based, as well as Statoil’s offices in Norway. The three energy giants and oil price data collector Platts have confirmed that they were cooperating with the investigation by the European Union executive.

“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,” the Commission said in a statement on Tuesday. The Commission was also concerned that the companies might have prevented others from participating in the price assessment process with a view to distorting published prices.

The Telegraph quoted Statoil as saying that the suspected violations “related to the Platts’ Market-On-Close (MOC) price assessment process” and “may have been on-going since 2002”. BP and Shell spokesmen said that their companies were fully cooperating with the investigation but declined to comment further.
**Libor Reminder**
The EU oil price probe has highlighted the lack of transparency in the pricing process of some energy markets. “It is certainly the case that Libor drew attention to financial benchmarks in general and the question of how these agencies report prices,” Timothy McIver, an antitrust lawyer at Debevoise & Plimpton LLP,” has said, as quoted by Bloomberg. “This is obviously the latest in a series of such investigations.”

Last year, an investigation into the process of determining the London interbank offered rate, popularly known as Libor, uncovered manipulation and led to hefty fines against a group of major banks. A dozen of other financial companies are still under investigation.
**Market Reaction**
Analysts are sceptical that the probe by the European Commission will have the same significance for the oil companies under investigation as the Libor scandal had for banks. “It’s hard to see at this stage what we should be reacting to,” Peter Hutton, oil analyst at RBC Capital Markets, has noted, as quoted by the Telegraph. “It’s under investigation, it’s still very early days, and people don’t know the scale or any culpability.”

!m[Market Reaction to the Investigation Subdued](/uploads/story/2266/thumbs/pic1_inline.png)
Market reaction was subdued on Tuesday with BP’s and Shell’s share prices closing marginally down in London and New York. Statoil’s share price was also little changed at the close of the NYSE.
**BP’s share price was 0.09 percent down at 468.15 in London as of 8:52 on 15 May 2013 whereas Shell’s share price was 1.87 percent lower at 2,238.90p.**
**In New York on May 14, BP’s share price closed 0.21 percent higher at $43.11, Shell’s share price closed 1.01 percent up at $69.75, whereas Statoil’s share price was 0.08 percent lower at $23.83.**


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