Global financial watchdogs have backtracked on proposals for greater regulation of the physical oil market due to opposition from oil majors and bodies including the International Energy Agency and the Opec cartel.
The International Organisation of Securities Commissions, an umbrella group of financial regulators, pushed in favor of strong regulation this year on how commodities benchmarks, including Brent crude, are compiled. But the group has now backed away from its first proposals and on a final draft report seen by the Financial Times has largely suggested retaining the current status quo.
The Commodity Futures Trading Commission â€” in an internal memorandum also seen by the FT â€” named the IEA and Opec as the international organizations and Shell and Total of France as the oil companies involved in the talks. The CFTC, the US federal regulator, suggested there was unease among regulators about the draft.
The regulatory climbdown comes despite the draft saying that the potential for misconduct in oil â€œis not mere conjectureâ€ and after several banks recognized they manipulated Libor, the benchmark used to price trillions of dollars in loans.
â€œNotwithstanding differences…the recent Libor settlements illustrate the vulnerability of benchmark setting processes to potential manipulation in order to benefit positions on derivatives markets,â€ the draft states.
Via – CNBC