Anglo-Dutch oil company Royal Dutch Shell PLC on Thursday called for tougher regulation of the Dubai crude benchmark, the Middle East's most important oil-pricing mechanism, which has pushed up the region's prices relative to other grades.
"Regrettably, there have been times in recent months where the price of Dubai (crude) was assessed well in excess of the fundamental refining value of other comparable Middle Eastern crudes," Shell said in a statement.
The Dubai benchmark, which is assessed by oil pricing agency Platts, is comprised of the three grades of Middle Eastern crude. Two additional grades will be added once proposals under consideration by Platts are finalized.
Shell argued that Asian crude oil is not subject to oversight as rigorous as benchmarks in other regions, as the onus to ensure a fair market lies with price reporting agencies rather than regulators.
To level the playing field, Shell is calling for position limits and clearing procedures, similar to those in North America and Europe.
In August, China's state-owned oil company Chinaoil, the trading arm of PetroChina Co (601857.SS), snapped up a record 36 million barrels of oil, pushing up Middle East crude prices for Asia, even as other grades remained under pressure due to a global glut.
"There need to be safeguards to prevent the risk of distortion and to ensure the Dubai benchmark price mirrors true market supply and demand fundamentals," Shell said.
The volumes bought by Chinaoil and sold by Chinese state oil and petroleum products trader Unipec were so high that pricing agency Platts said in August it was considering whether to allow more crude into a pool of supplies it uses to assess its daily Asian benchmark, the Dubai crude price.
However, Platts' global head of oil content Dave Ernsberger said that the price-reporting agency is "not responsible for policing who buys and sells in the markets", the Financial Times earlier reported.
Chinaoil and Unipec could not immediately be reached for comment outside regular business hours.
Platts previously held talks with customers in 2011 over the addition of Qatar Marine to the Dubai basket due to worries about Oman supply disruptions, but nothing was implemented.
Platts, a unit of McGraw Hill Financial Inc, competes with Thomson Reuters in providing news and information to the energy markets.
(Reporting by Ankush Sharma in Bengaluru, additional Reporting by Liz Hampton; editing by Hugh Lawson, G Crosse)