Trading Houses Limit Gasoline Trades as Profits Slump

Posted by Joseph Keefe
Wednesday, September 03, 2014

Traders Mercuria, Trafigura and SOCAR cut gasoline desks; new refining capacity slashes traditional profitability. U.S. refining boom weighs on global light products.

Trading houses are shrinking their gasoline desks in response to a slump in activity, particularly in Europe, where overseas competition and rising global supplies have limited opportunities to make money.

New and highly competitive refineries on the U.S. Gulf Coast, in Asia and the Middle East have increased global supplies of the motor fuel.

That has made the most active and lucrative trading routes, such as the transatlantic arbitrage between Europe and the U.S. East Coast, less and less profitable for traders.

"After a decent beginning to the year, the arbitrage to the U.S. has been mostly shut and opportunities are limited. The paper (futures) market has been in disarray so it has been a very difficult market overall," a European gasoline trader said.

A market source added: "No trading house has made money and margins are so poor with nothing on the horizon to suggest things will change."

The new refineries include the 400,000 barrels per day (bpd) Jubail refinery in Saudi Arabia and Reliance's 660,000 bpd Jamnagar refinery in India.

At the same time, U.S. Gulf Coast refineries benefiting from abundant and relatively cheap shale oil, such as Motiva's 600,000 bpd Port Arthur refinery and Exxonmobil's 560,500 bpd Baytown refinery have become major exporters of oil products all over the world.

While refiners have no choice but to trade their output regardless of how markets are moving, trading houses benefit from flexibility that allows them to grow and shrink trading desks in response to market conditions.

Geneva-based Mercuria has in recent months effectively shut down its European gasoline trading operations with the departures of three traders, Anthony Young, Dominic Jevons and Xavier Lespinasse, trading sources said.

Trafigura's Matthew Scothorn and James Hutchinson left the gasoline trading desk in Geneva earlier this year.

In Singapore, Anand Kumar, a gasoline trader for Azeri oil firm SOCAR, has recently left the company, less than six months after joining from Trafigura, sources said.

Mercuria and Trafigura declined to comment on personnel changes. SOCAR was not available for comment.

GLOBAL SUPPLY


While global gasoline supplies have been on the rise with the new super refineries, consumers are still buying the fuel. Global demand reached around 15 million bpd in 2013, up from around 14.5 million bpd in 2012, according to International Energy Agency data.

Trafigura's gasoline tanks in Amsterdam, used for blending and storing different components to produce gasoline, have been empty and idle in recent months, trading source said. Trafigura declined to comment on the tanks' usage.

Another Trafigura gasoline trader, Max Tan, left the company's Singapore office in August.

Sources said it the pressure was not just on gasoline. Trading margins for other light distillate products, such as naphtha, could start to buckle under the weight of increased supplies.

While naphtha remains a key feedstock for petrochemical makers in Asia, rising U.S. liquefied petroleum gas (LPG) exports were hurting naphtha sellers, who witnessed a record volume of naphtha being replaced by LPG this year.

Mercuria Singapore's office also saw the departure of gasoline trader Nicolas Le-Tallec around June, followed by Simon DiFranco leaving its naphtha desk in Singapore in August. The reasons behind the moves were unclear.

For Europe, whose refiners produce an excess of gasoline but not enough diesel, gasoline exports have been crucial to sustain prices. But lower demand from the United States has significantly narrowed trade opportunities.

"Atlantic Basin gasoline demand has been very weak in 2014, notably U.S. demand growth has halved from 2013 levels," said David Fyfe, head of market research and analysis at Swiss-based trader Gunvor. Weak U.S. retail prices are expected to persist in 2015, prolonging the weakness, he said.

Similarly, the arbitrage to West Africa, up until last year largely dominated by Europe, is increasingly supplied by U.S. refiners.


By Ron Bousso and Seng Li Peng

Maritime Reporter August 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

USCG Respopnds to Sunken Vessel Near Sitka, Alaska

The Coast Guard is responding to the sinking of a fishing vessel in Kelp Bay near Sitka Friday. Coast Guard personnel from Sector Juneau, the Coast Guard

Next LCS to be Named USS Minneapolis/St. Paul

Secretary of the Navy Ray Mabus announced today that the next Freedom-variant littoral combat ship will be named USS Minneapolis/St. Paul (LCS 21). The future Minneapolis/St.

Hapag-Lloyd Adds 6,000 Reefer Containers

In order to profit from the growing reefer markets in South America and Asia, Hapag-Lloyd has ordered 6,000 cutting-edge reefer containers – more than ever before in the company’s history.

Contracts

Next LCS to be Named USS Minneapolis/St. Paul

Secretary of the Navy Ray Mabus announced today that the next Freedom-variant littoral combat ship will be named USS Minneapolis/St. Paul (LCS 21). The future Minneapolis/St.

MSC Upgrades Europe-West Africa Service

As part of our objective to continually improve our services to customers, MSC is delighted to announce an upgrade to its Angola Express service with a first

Ballast Water System Retrofits for 11 Containerships

Eleven container vessels owned by Bernhard Schulte GmbH & Co. KG, based in Germany, are to be retrofitted with Wärtsilä Aquarius Ballast Water Management Systems (BWMS), Wärtsilä announced today.

Finance

Next LCS to be Named USS Minneapolis/St. Paul

Secretary of the Navy Ray Mabus announced today that the next Freedom-variant littoral combat ship will be named USS Minneapolis/St. Paul (LCS 21). The future Minneapolis/St.

MSC Upgrades Europe-West Africa Service

As part of our objective to continually improve our services to customers, MSC is delighted to announce an upgrade to its Angola Express service with a first

Imtech Germany to Be Sold in November

The German unit of bankrupt Dutch engineering services company Imtech is expected to be sold in November, according to Imtech Germany's insolvency administrator.

Energy

AET Names DP Shuttle for Statoil Charter

Petroleum tanker owner and operator AET today named its newest vessel, a 120,000 DWT DP2 shuttle tanker, Eagle Bergen.    Eagle Bergen is the second of two vessels

US Oil Drillers Cut Rigs as Crude Prices Collapse

U.S. energy firms cut a surprisingly sharp 13 oil rigs this week, the first drop in seven weeks, as a renewed slump in prices this summer forced drillers to make a second round of cut-backs.

Asia Tankers-VLCC Rates Will See More Volatility

VLCC market to be "hot" in Q4 -VLCC broker. Freight rates for very large crude carriers (VLCCs) face a roller-coaster ride on uncertain cargo volumes and vessel

News

USCG Respopnds to Sunken Vessel Near Sitka, Alaska

The Coast Guard is responding to the sinking of a fishing vessel in Kelp Bay near Sitka Friday. Coast Guard personnel from Sector Juneau, the Coast Guard

Next LCS to be Named USS Minneapolis/St. Paul

Secretary of the Navy Ray Mabus announced today that the next Freedom-variant littoral combat ship will be named USS Minneapolis/St. Paul (LCS 21). The future Minneapolis/St.

MSC Upgrades Europe-West Africa Service

As part of our objective to continually improve our services to customers, MSC is delighted to announce an upgrade to its Angola Express service with a first

People in the News

USCG Respopnds to Sunken Vessel Near Sitka, Alaska

The Coast Guard is responding to the sinking of a fishing vessel in Kelp Bay near Sitka Friday. Coast Guard personnel from Sector Juneau, the Coast Guard

ISS Appoints Holmes as VP, Cruise Solutions

Inchcape Shipping Services (ISS) said it is embarking on a plan to develop its cruise business with the appointment of Grant Holmes as Vice President, Cruise Solutions.

Australia's New Shipping Laws Threaten Loss of Jobs

The planned changes to Australia’s shipping laws would cause a 93% loss of Australian seafaring jobs a new report says.   More than nine in 10 domestic seafarers

Logistics

MSC Upgrades Europe-West Africa Service

As part of our objective to continually improve our services to customers, MSC is delighted to announce an upgrade to its Angola Express service with a first

Port Pipavav Berths its Largest Box Ship

APM Terminals Pipavav (Gujarat Pipavav Port Ltd.), a gateway port in western India, has berthed the largest container vessel in the Port Pipavav’s history, the terminal announced today.

Timing in Doubt on Hapag-Lloyd IPO

German container shipping group Hapag-Lloyd has taken further steps in preparation of a stock market listing and has mandated more banks for the move, but it remains

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Naval Architecture Navigation Pipelines Ship Simulators Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.7609 sec (1 req/sec)