THE WALL STREET JOURNAL: Shell Trader, Unit Are Fined Over Bogus Oil Trades: "While the fines are small, they come as the Anglo-Dutch oil company struggles to repair its reputation, battered in an energy-reserves accounting scandal in 2004.": "constituted fictitious sales": "Shell declined to say whether it brought any disciplinary action against Mr. Catterall. He was unavailable for comment.": Thursday 5 January 2006

The Commodity Futures Trading Commission fined a top oil trader at Royal Dutch Shell PLC and one of the energy titan's trading subsidiaries a combined $300,000 for a series of bogus oil-futures trades on the New York Mercantile Exchange.

While the fines are small, they come as the Anglo-Dutch oil company struggles to repair its reputation, battered in an energy-reserves accounting scandal in 2004. The fines also come at a time of popular resentment over steep energy prices, including all-time highs last year for benchmark U.S. oil futures at Nymex.

The CFTC said it had found that, on at least five occasions from November 2003 to March 2004, traders for Houston-based Shell Trading U.S. Co. and London-based Shell International Trading & Shipping Co. executed prearranged and noncompetitive trades in crude-oil futures contracts, in violation of exchange rules. In each instance, the regulator found, Shell traders agreed to swap a prearranged quantity of oil-futures contracts for delivery in the same month.

The mirror-image trades, which were then executed on the exchange via brokers, "constituted fictitious sales" that eliminated price competition and market risk for the two entities, the CFTC said in a regulatory order released yesterday. Further details of the trades weren't disclosed.

It isn't clear whether -- or by how much -- Shell benefited financially.

The CFTC said it agreed to settle charges of trading violations and issued a $100,000 civil fine against Nigel Catterall, head futures trader at Shell Trading U.S., who the commission said was engaged in three of the trades. The commission ordered Shell International Trading & Shipping to pay a further $200,000.

Shell agreed to the fine without admitting or denying the commission's findings. In a statement, Shell said it had reached a separate, unspecified settlement with Nymex over the same matter. "We are pleased that this matter has been brought to a close," Shell said.

A spokeswoman for Nymex said the exchange didn't have any comment on the settlement.

Shell declined to say whether it brought any disciplinary action against Mr. Catterall. He was unavailable for comment.

The CFTC said that none of the prearranged trades included prior agreements on pricing for the contracts, thus distinguishing the transactions somewhat from so-called round-trip, or wash, trades. Wash trades, which typically include two parties agreeing to exchange the same amount of a commodity for the same price, can be used to inflate revenue figures or manipulate prices.

Heavy wash trading in the natural-gas market in the U.S. earlier this decade undermined the credibility of that market. Oil-futures markets, however, are more liquid, making it much more difficult for isolated trades to distort prices. In late 2003, BP PLC agreed to a record $2.5 million fine with Nymex, settling charges of improper crude-oil trading, including wash trading.

Write to Chip Cummins at chip.cummins@wsj.com