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Shell calls for stronger regulation to avoid Middle East oil price distortion

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Screen Shot 2015-11-20 at 08.55.47Anthony McAuleyDecember 22, 2015

Royal Dutch Shell is lobbying to reform regional oil trading after a series of price squeezes, particularly by Chinese state oil firms.

In a highly unusual move, Royal Dutch Shell has called for greater regulation of the market to improve transparency and avoid price distortion.

Now, Shell is following up its public call with behind-the-scenes efforts to gather support for change, particularly from the regional state oil firms.

“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,” a Shell spokesman said. “Due to some of the unique characteristics of the Dubai market, it is susceptible to and can be heavily influenced by a market participant amassing a large portion of the available three crudes deliverable in that month.”

The Shell move has surprised many of its oil trading peers.

“When you get a major oil company calling for more regulation you know something must really be wrong,” said one senior member of the local trading community.

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