Business | Oil & Gas
Oil majors go silent as shadow of US regulator grows bigger
A crackdown by US regulators on energy trading may make some physical oil markets more unpredictable and opaque by prompting major companies to cut off communications with market media.
- Reuters
- Published: 00:00 October 29, 2006
Singapore: A crackdown by US regulators on energy trading may make some physical oil markets more unpredictable and opaque by prompting major companies to cut off communications with market media.
Chevron Corp followed ExxonMobil Corp and Royal Dutch Shell this August in curbing the exchange of information between its oil traders and the publishers and news agencies that report on crude and product markets.
Although the oil market's primary benchmark pricing systems have not been affected, the changes are being felt in smaller, niche markets where days or weeks can pass without any public trades and prices are often known only to a handful of players.
Reducing that pool of contacts may hurt the accuracy of the information and make some prices less reliable, analysts say, in turn making it more difficult for some players particularly smaller traders, refiners or producers to make decisions.
"In Asia, where people rely on price reports, the price discovery process is likely to be less transparent," said Craig Pirrong, director of energy markets at Houston-based Global Energy Management Institute.
"If companies don't talk to reporters, it's detrimental to the market," he said.
Privately, trade sources at all three companies say they chafe at the strictures and would prefer to leave the lines of communication open to facilitate transparency, exchange information and to air their views on market conditions.
But corporate lawyers have overruled them, fearful of the kind of scrutiny now focused on BP if traders are too talkative in over-the-counter markets.
The US Commodity Futures Trading Commission (CFTC), charged with overseeing oil futures, in June accused BP of manipulating physical propane markets in 2004. BP denies the charge.
US federal investigators are also examining BP's over-the-counter crude and unleaded gasoline futures dealings, sending shivers through an industry that had assumed most physical oil markets were outside regulators' pur-view.
The CFTC has said it is reluctant to impose new rules on the market and that its action against BP is based on current regulations. But oil companies are taking no chances.
"Due to ongoing changes in the regulatory environment, Chevron has decided to cease all communication between representatives of price reporting agencies and Chevron Global Supply and Trading employees," Chevron said in a statement.
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