ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(80)707
Vol.1980/0225

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)707Final
Brussels.12november1980
Communication fromtheCommission
totheCouncil
TheEuropeanSpotMarketsforOilProducts
,":r
y/^
/ ■
COM(80)707Final

Communication fromtheCommission
totheCounciL
TheEuropeanSpotMarketsforOiIProducts
Introduction
1.Government concernabouttheeffectsthatexceptionally highprices
ontheMediterranean andNorth-West European (theso-called
Rotterdammarket)spotmarketforoilproductshaveonworldwide ,
oilcostsandoncostsondomesticmarkets,ledtheCommission
tostudy ,thestructure «ndoperationofthesespotmarkets.
TheCommission hasundertaken twoseparateexaminations .The
firstwasthere-introduction oftheregisterofspottransactions
thatwasoperatedforsixmonthsin1978underthename"Checkrun".
-Thisnewregister,called"COMMA"(Commission MarketAnalysis),
ranfrom4June,1979to31May1980atatotalcostofapproxi­
mately500,000EUA.Itprovided,throughthevoluntary
participation oftheindustry,considerably widercoveragethan
theCheckrunandwasorganisedtoprovideadeeperunderstanding
.ofthemarket'sstructure andoperation.Thevery,detailed
consultant'sreportonCOMMAhasalreadybeenforwardedforthe
information oftheMemberStates..
Thisunderlines thefunctionofspotmarketsofbalancingsupply
anddemandatthemarginandthefactthattheNWEandMediterranean
spotmarketsaresmallinrelationtothetotaltradeinailproduct
inEurope.Themainproductstradedwerefueloilandgasoil,each
accountingforaround38%ofthetotal.Thetotalvolume ,ofspot
transactions reportedwas43milliontons,ofwhichNWEreports
accountedforthreequartersandMediterranean reportsfora
quarter.Takingintoaccountthatindividual productparcelsmay
betradedseveraltimes,thenetspottradeinNWEcanbeestimated
at20milliontons(oraround5%ofNWEconsumption),about50%'
lowerthantheresultsofthefirstCommissioninquiryintothe
spotmarkets.
Thesecondexamination organisedbytheCommission wasundertaken
byagroupofexpertsfromdifferentpartsoftheoilindustry.
Underthetitleof"TheBourseGroup'',theseexpertsstudiedthe
possibility ofestablishing aformalisedtradingfloorforoil
productslikeabourseorcommodityexchange.Copiesofthereport
preparedbyTheBourseGrouphavealreadybeenforwardedto
MemberStates. ' ' ■
\ _ s'
Thegroupnotedthatamarketinthesenseofaneffectivetrading
mechanismexists.-Itdiffersfromanofficialbourseinthat
thereisnoregistration ofmembership,noofficialregistration

-2-
orreportingoftransactions (i.e.pricesandvolumes),no
*formaladministrative bodyandnophysicaltradingfloor.
Buttheexistenceofmoderntelecommunication systemsrenders '
thephysicalcentralisation oftradingunnecessary,animplicit
codeofconduct]existsandpriceinformationisgiven,by
Piatt'sOilgramandotherpublications .
Thegroupdidnotconsiderthataboursewouldsignificantly
improvethewayinwhichspottradeishandledandwhilethe
physicalpossibility ofestablishing abourseisnotcontested,
sufficientinteresttoallowtheestablishment ofaworthwhile
organisation cannotbeexpected.
Inthiscontext,theinitiativeoftheLondonCommodity
Exchangetoestablishamarketinoilproductfutures,which
isaninteresting development,shouldberecalledandfollowed
carefully.
.2.FollowingthecompletionoftheworkofCOMMAandTheBourse
45roup,thepurposeofthiscommunication istooutlinethe
,policyconclusions. I
Itshouldberecalledthatspotmarketpriceshayeaninfluence ••
beyondthepurespottransactions becausetermdqals,affiliate
transferpricesandconsumerpriceformulaeare<$fter»directly/linkedto$potquotations.Itshouldbetheconcernbothof
government!andprivateindustry,whilenotimpairingtheessentialEconomicfunctionofthespotmarket,l-oimprovemarkettransparency andtoavoidexcessivepricefluctuations,
particularly inconsumerpricesandinthosepaidunderlong
termcontracts.Inthiscontextitwouldbeusefultogive.
'thoughttothepossibilitythatpricesoflongtermcontracts
'shouldnotonlyreflectspotmarketquotationsasisoftenthe
case,butalsotakeaccountoflongtermtrends. '
PnceReportmg
:3.TheCommissiondoesnotconsiderthatapricereportingsystem
likeCOMMAshouldbemaintained onapermanentbasis.
Companiesimportingproductsalreadyhavetoreportforthe
register.Becauseofthemodalities,inparticularthevolume
cut-off,theregisterisnotasubstituteforspotmarket '.
monitoring.However,reportingshouldbespeededupsoasto
...provideeffectiveinformation onaverageproductimportcosts.
Forthespotmarketassuch,theCommissionproposesthatthe
abilitytore-introduce COMMAforashortperiodshouldbe
maintained onastand-bybasis.Thiswouldbedoneinsuchaway
thatitcouldbequicklyintroducedattimesofartificial
disruptionofthesupply/demandbalance.
Inthisway,publicauthoritieswillobtainquickandrealistic
information ?boutspotmarketmovementsandinparticularabout
thenumberof-transactions involved.
./.

Codeofconduct
4.Buyersandsellersinthespotmarkethavebeenconcernedabout
governments' reactionstopricevolatilityintimesoftensionand
impliedsuggestions ofirregularities andmalpractices .Consequently ,
theyweregladtoparticipate inCOMMAanddemonstrate thatthey
hadnothingtohide.NowthatCOMMAisovertheyarekeentomaintain
government confidenceintheirtradepractices.Becauseofthis,
itappearsthatmarketparticipants whowishtosatisfygovernments
abouttheirtradingpracticeswillbereadytoadoptasuitablecode
ofconduct,whichwouldprovideopenandpublicassuranceoftheir
reliability andadherencetohighethicalstandardsoftrading
practice.ItistheCommission'sviewthatanysuchdevelopment
shouldbewelcomed.Bothbyisolatingthoseunwillingtoaccept
therequirements ofthecodeofconductandbyproviding a
relationship betweenthosethatdoandgovernment,asignificant
contribution towardsmaintaining bettertransparency wouldbemade.,
Summaryandconclusions
5.a)Thereisnodirectinterestforgovernments inCOMMA'S
beingcontinued onapermanentbasis.
b)Inperiodsofartificialdisruption ofthesupply/demand
balance,thereis^a'needforgreatertransparency ofthe
functioning ofthespotmarket.Itisproposedtoestablish
thecapabilityofre-introducing COMMAonastand-bybasis.
/- '^
c)Itdoesnotseemtobepracticable toestablish aformalised/
"Bourse"foroiltrading,buttheadoptionbythosethat
participate inthemarketofaspecified codeofconduct
shouldbewelcomed.
.d)Consideration shouldbegivenbymarketparticipants tothe
possibility thatpricesforlongtermcontractsshouldtake
moreaccountoflongertermtrends.