Morgan Stanley struck a deal to sell its oil-trading and storage business to Castleton Commodities International, bringing the bank closer to unloading a unit that has attracted heightened regulatory scrutiny.

The terms of the transaction were not disclosed, but people familiar with the matter said the price tag was between $1 billion and $1.5 billion. The precise breakdown of the purchase price was not clear. Most of the amount likely covers the value of physical assets and contracts, with some additional payment for the value of the trading franchise itself.