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By Sarah Kent and Georgi Kantchev 

LONDON--Europe's commodities traders are warning that new regulations set to be released within days could roil markets and push up costs for a range of essentials from crude oil to chocolate.

A final draft of expanded rules governing the European Union's oversight of financial markets are expected to extend its authority over firms that focus on trading in oil, farm products, industrial metals like copper and a host of other commodities. It would add a new layer of scrutiny for an industry that has historically operated with limited oversight.

The EU's current rules mostly apply to financial institutions like banks and investment funds. The new regulations will likely require a larger number of companies to set aside money to backstop their trading and limit the number of contracts they trade in a given time.

Big commodities traders from Royal Dutch Shell PLC to Mars Chocolate to Trafigura Beheer B.V. have objected to the idea of being treated essentially like banks, lobbying Brussels to exempt them from some of the rules.

Such rules, they argue, would make it harder to trade and could cause some to leave the market, making it more expensive for airlines, utilities and others to manage their exposure to commodities prices--costs that would ultimately be passed on to consumers.

"We are utterly in favor of regulation, but we don't want bad or over-regulated markets that make liquidity dry up," said Graham Francis, managing director at interdealer broker ICAP Energy. "If a bunch of liquidity leaves, then what? Things will be more expensive for consumers...and you've probably not improved market stability or functionality."

Traders have been waiting for more than a year for the European Securities and Markets Authority to issue technical details about how the regulations--known as the Markets in Financial Instruments Directive, or MIFID II--will be applied. They are especially interested in what will be captured by the new rules, the volumes they will be able to trade and whether they will leave big traders subject to holding capital in a similar way to banks.

"We are not a bank," said Patrick Pouyanné, chief executive of French oil giant Total SA, which has a large trading arm. He added in a Wednesday interview: "I believe that we need some regulations but up to a point that leaves markets to work."

Shell has warned that it could have to commit up to $30 billion in regulatory capital if the rules are enforced as currently proposed. That could prompt the company to restructure or move part of its trading arm to a country with less onerous rules.

Reemt Seibel, spokesman for ESMA, said the agency appreciates the concerns raised by businesses and would consider them.

"It is not the aim of any regulation to kill business," he said.

The biggest American oil companies such as Exxon Mobil Corp. and Chevron Corp. haven't been as vocal in opposition to the new rules. They focus their trading around selling the crude they produce. Major European oil companies have large trading arms that buy and sell additional volumes they didn't produce.

Some observers said traders are being hyperbolic and the regulations are necessary to ensure the proper functioning of financial markets.

"This is the minimum set of requirements that is indispensable," said Diego Valiante, head of the financial markets and institutions unit at the Centre for European Energy Studies and an adviser to ESMA. "I disagree that it will create a big market disruption," he added.

The EU's latest regulatory push was conceived in the wake of the financial crisis, amid heightened concerns over systemic risks in the market and the role speculators play in pushing up prices for vital raw materials like oil and agricultural commodities.

It mirrors a similar regulatory crackdown in the U.S., launched by the 2010 Dodd-Frank law, but many view the proposed European regime as likely to be more stringent. The technical details scheduled for publication by the end of September will affect equity, bond and commodity markets. They are due to come into effect in early 2017.

In a sign of the impact the rules could have on financial markets, Germany, France and the U.K. in August expressed concerns over some of the details and called on regulators to modify some aspects.

Write to Sarah Kent at sarah.kent@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

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(END) Dow Jones Newswires

September 24, 2015 09:30 ET (13:30 GMT)