According to a claim made by four oil traders in a lawsuit, the Brent crude spot prices have been rigged for more than a decade, and the top oil companies are responsible.
The traders claim BP PLC, Royal Dutch Shell and Stratoil ASA were conspiring with Morgan Stanley, along with energy traders at Vitol Group, to manipulate Brent spot price – allegedly. Brent is used to price the buying and selling of over half of the global crude, as well as determine the costs of heating oil and gasoline.
This case is part of several others in the US that alleges price manipulation in the Brent markets, and it apparently is the most descriptive. It is said that contracts of Brent were purchased at “artificial and anticompetitive prices,” and outline attempts to manipulated Russian Urals crude and various grades of Dubai crude.
The class-action suit implicates that oil companies and trading houses supplied falsified information to Platts, which is an energy news and price publisher that traders use.
“Spoofing” one way attempts to mislead the market were made. This is where large orders are placed in order to move the market in swaps, spot and futures, only to be cancelled later on. Royal Dutch Shell and British Petroleum (BP) are large enough to move the markets in any direction they want.
The offices of these two oil giants, along with Platts, were raided prior to this lawsuit by European Union antitrust authorities on the suspicion of collusion.
The four traders, including former NYMEX director Kevin Mcdonnell, claim that Shell sold a shipments of Forties-blend of crude at artificially low prices to keep prices low. Forties-blend is one of four blends Platts used for Brent quotes. And one of the buyers of these artificially low shipments were Morgan Stanley. The traders claim Shell has a short position in the swaps market that would benefit from artificially low crude.
These lawsuits are questioning the motives of the physical commodities markets that are rather obscure. According to the traders, specialists and traders can successfully manipulate prices because these products on not traded on regulated exchanges.