WHITE PLAINS, N.Y. (CN) - BP, Shell and Statoil fixed North Sea crude oil prices and restricted trade for years by misleading reporting agencies, a trader claims in a federal class action.
Lead plaintiff Prime International Trading sued BP, Royal Dutch Shell and Norwegian oil company Statoil, in Federal Court.
Chicago-based Prime International is a member of the Chicago Board of Trade, Chicago Mercantile Exchange, NYMEX (the New York Mercantile Exchange) and ICE (the Intercontinental Exchange), the world's largest energy futures exchanges.
Prime claims the defendants and unnamed co-conspirators deliberately reported inaccurate information about North Sea sweet light crude oil (a commodity known as Brent Crude oil) to Platts, the leading reporting agency for the Brent Crude Oil commodity and futures contracts traded on NYMEX and ICE, undermining the entire pricing structure for the Brent Crude oil market since 2002.
Platts, a unit of McGraw Hill Financial, compiles and publishes Brent Crude oil prices for traders in the United States. Platts is not a party to the complaint.
"As major producers and market participants in the Brent Crude oil market, including contributors of Brent Crude oil prices to Platts, defendants had and continued to have market power and the ability to influence prices in the Brent Crude oil market," the complaint states. "By purposefully reporting inaccurate, misleading and false Brent Crude oil trade information to Platts, defendants manipulated and restrained trade in both the physical (spot) Brent Crude oil market and the Brent Crude oil futures market." (Parentheses in complaint.)
The European Commission confirmed this month that it is investigating several companies that may have reported distorted prices for crude oil and conspired to monopolize price-setting, according to the complaint.
"Almost immediately following the European Commission's announcement on May 14, defendants BP plc, Royal Dutch Shell plc and Statoil ASA each confirmed they are the subject of the European Commission investigation," the complaint states. "In particular, defendant Statoil confirmed that its office in Stavanger (Norway) was subject to an inspection by the EFTA Surveillance Authority, assisted by the Norwegian Competition Authority. Statoil acknowledged that the inspection was carried out at the request of the European Commission. Further, Statoil confirmed that the scope of the European Commission's investigation is 'related to the Platts' market-on-close price assessment process, used to report prices in particular for crude oil, refined oil products and biofuels' extending back to as early as 2002.
"On May 17, 2013, the U.K. Serious Fraud Office announced that it was 'urgently reviewing' the European Commission's allegations of price-fixing in the oil markets and determining whether to accept the case for 'criminal investigation.' That same day, the United States Senate called for the U.S. Department of Justice to join the European Commission investigation."
Prime International claims it traded hundreds of thousands of Brent Crude futures contracts at prices manipulated by the defendants' price-fixing. It claims to represent thousands of traders who have been misled by the manipulated prices since 2002.
It claims the defendants knew that misreporting crude oil prices to Platts would have a serious impact on the U.S. market for crude oil, refined oil products, biofuels and futures contracts.
"The Brent oilfields in the North Sea currently have the highest physical daily output of any of the world's recognized oil benchmarks," the complaint states. "Brent is the leading global price benchmark for Atlantic basin crude oils and it is used to price two-thirds of the world's internationally traded crude oil supplies."
Prime International claims the defendants nonetheless continued "their deliberate and systematic submission of false Brent Crude oil trade information to Platts."
It seeks class certification, an injunction, restitution, and damages for violations of the Commodity Exchange Act, the Sherman Act, and unjust enrichment.
Prime International is represented by Vincent Briganti with Lowey Dannenberg Cohen & Hart.