Europe Shrugs Off BofA Ban On Long-term Trade with BP

16th Jun 2010 13:34

By Paddy Gourlay Of DOW JONES NEWSWIRES LONDON (Dow Jones)--European traders reported business-as-usual dealings with BP PLC (BP,BP.LN) Wednesday morning, despite reports that Bank of America Corp. (BAC) has told its traders not to enter into long-dated trades with the troubled oil major. Rating agency Fitch has downgraded BP's long-term issuer default rating to 'BBB', just above junk status, which appears to have prompted Bank of America and its subsidiary Merrill Lynch to stop trading with the oil major beyond June 2011, according to a Reuters report. Several European traders said the bank has acted unilaterally to date, and said gossip centred on whether BP could be taken over. "We still do not ask BP to open a letter of credit when selling to them...we do when companies are really in trouble," said one Swiss-based fuel oil trader. He added: "If Merrill stops trading oil, nobody will feel it." Meanwhile, a crude-oil trader pointed out the long rather than short-term ban on trading probably reflects Bank of America company policy in the event of downgrades, rather than concerns of the company failing as it pays out liabilities arising from the oil slick in the Gulf of Mexico. "Merrill is limiting trade with BP to no more than 12 months out, I guess triggered by the Fitch downgrade and bank internal trade guidelines," he said. BP also continues to remain a member of the ICE exchange Wednesday, which carries the risk of trading Brent futures and gasoil futures on the bourse. But the oil major still needs to hedge its long-dated product positions, such as fuel oil, distillates and gasoline, in bilateral over-the-counter trades. -By Paddy Gourlay, Dow Jones Newswires, +44 (0)20-7842-9364; [email protected] (Reza Amanat and Angela Henshall in London contributed to this article.) (END) Dow Jones Newswires June 16, 2010 08:34 ET (12:34 GMT)