Mercuria Energy Group opened a trial in London on Monday accusing the Baltic Exchange of continuing to publish the TD3C benchmark oil tanker rate while Iranian disruption choked shipments through the Strait of Hormuz. Mercuria says the exchange kept publishing the rate to avoid losing business to a competitor. The Baltic Exchange rejects the claim as without merit.
The dispute over publication
The TD3C rate measures the cost of hiring a supertanker from Ras Tanura in Saudi Arabia to China. It underpins tanker contracts and billions of dollars in derivatives. Mercuria is asking the court to declare that the exchange breached its obligations and should have suspended the benchmark. Mercuria’s case rests on an April 14 call, in which a senior freight assessor at the exchange said the risk of being replaced by a competitor was the overriding fear of the operation.
Mercuria also cites an April 2 comment from a broker. The company has withdrawn its earlier estimate of losses, which ran to hundreds of millions of dollars.
The exchange’s defence
Chief Executive Officer Mark Jackson said the exchange was confident it had met all its statutory, contractual and regulatory obligations in producing TD3C. In court filings, the exchange’s lawyers said the decision to keep publishing the rate was not taken lightly. The exchange says it could still price freight risk and that it consulted the market before deciding.
The Baltic Exchange was founded in 1774.
Source: Baltic Exchange
