Royal Dutch Shell Plc  .com Rotating Header Image

Royal Dutch Shell, BP plc Oppose New European Oil Trading Regulations

Screen Shot 2015-05-08 at 17.12.19

Screen Shot 2015-05-21 at 21.01.20

By: MICHEAL KAUFMANPublished: May 21, 2015 

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) has sided with oil rival BP plc (ADR) (NYSE:BP) in calling on European regulators to step back from enforcing tougher new capital requirements and increased disclosure measures pertaining to oil trading. The Markets in Financial Instruments Directive or Mifid II regulations are being introduced by the European authorities, which will be applied in 2017. The regulations include capital requirement directive (CRD IV) the purpose of which is to mitigate systemic risks in the commodity, fixed income and equity markets.

There are hundreds of people employed by Shell and BP at their trading divisions, where millions of barrels of oil and refined products are traded each day. According to research by trading house Trafigura, the fresh capital requirements when introduced, will hurt traders as they will be forced to deleverage, which would in turn lead to a rise in commodity prices.

The head of BP’s trading division Paul Reed had said last month that because of the impending European Union (EU) regulations, some markets were vulnerable to severe stress, Reuters reports.

Mr. Reed was joined by vice-president for trading at Shell, Mike Muller, on Wednesday when he too voiced opposition to the new regulations being introduced. According to him, the move to impose tough new capital requirements would result in unintended consequences for trading houses and companies, restricting their capacity to trade in derivatives, Reuters reports.

At the Platts crude summit in London Mr. Muller said that large oil companies and trading houses do not run banking licenses and were not conducting any lending activity. He added that if a commodity firm were to fail it is improbable that it would lead to a bank run.

Mr. Muller opposed the restrictions placed on derivatives trading in the new regulations, also known as position limits in the industry. He was of the view that the position limits should be specifically implemented on speculative players, rather than also including those that require derivatives for hedging purposes, to trade physical commodities. He added that hedging at companies like Shell takes place even before a physical position is taken, and that makes smart regulations an even more difficult undertaking. He believed that such regulations will make companies flee.

SOURCE and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

0 Comments on “Royal Dutch Shell, BP plc Oppose New European Oil Trading Regulations”

Leave a Comment

%d bloggers like this: