Oil rigging: Traders accuse BP and Shell of fixing prices
A new law suit claims some of the world’s largest oil companies – including BP, Royal Dutch Shell, manipulated Brent Crude spot prices in collaboration with Morgan Stanley, Vitol Group, and other energy traders.
The plaintiffs accuse the companies of deliberately submitting
false and misleading information about Brent prices to Platts,
the energy and oil market news outlet, which is used by traders
worldwide in daily transactions, Bloomberg reports.
“By providing false or inaccurate information and engaging in
false or sham trading, defendants undermined the entire pricing
structure for the Brent Crude Oil physical and futures
markets,” the plaintiffs allege.
By fixing the North Sea oil benchmark, the oil companies and
traders, not only manipulated the oil market, but petroleum,
food, and other products that look to Brent as a guide for buying
and selling across world exchanges.
Four traders - John Devivo, Robert Michiels, Anthony Insinga and
Kevin McDonnell - filed the class act in a Manhattan court in New
York on October 4.
Other companies accused of ‘fixing’ are Trafigura AG and
Trafigura Beheer British Virgin Island, Dutch commodity trading
firms, Phibro Trading LLC, a subsidiary of Occidental Petroleum
Corporation, Vitol Group, a Swiss-based, Dutch-owned energy
trader, S.A., and other unnamed traders.
The plaintiffs hope to bring some transparency to oil and
commodity exchanges, where it is alleged the prices are
superficially hiked up or driven down by the companies to gain
the most profit in futures and spot trading. The plaintiffs
describe this method as ‘spoofing’ – hiking the price of oil up
to drive markets while planning to cancel them later.
Prices for Russian Urals and Dubai crude may are also being questioned.
Not the first ‘spoof’
The lawsuit isn’t the first of its kind- gas companies were
raided by the European Commission (EC) last May and several
American companies have been accused of energy market
In May 2013, the EC launched surprise raids on BP, Royal Dutch
Shell, and Platts, looking for evidence of price rigging.
In July 2013, Barclays was met with a similar allegation over
suspected energy rate-rigging in California between 2006-2008
also brought by traders.
The Federal Energy Regulatory Commission, the government
regulator that provides oversight on the oil, natural gas, and
electricity industries, wants Barclays to fork over $470 million
for their manipulations, a fine Barclays says it will fight
JPMorgan Chase is under investigation by the top US energy regulator for an Enron-style energy market manipulation, which included similar ‘spoofing’ tactics- falsely inflating electricity prices for company profit. The bank could face a $500 million fine.
JPMorgan Chase head of Global Economies Blythe Masters was singled out for providing ‘false and misleading statements’ under oath.
In April 2008, the former board member of the New York Mercantile Exchange Steven Karvellas pleaded guilty to two counts of illegal natural-gas trading.
Energy markets aside, allegations have risen over traders
gambling with FOREX currency rates, using insider information to
'spike' their prices.