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 Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter April 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

Matson Announces Q2 Dividend of $0.18/Share

The Board of Directors of Matson, Inc. today declared a second quarter dividend of $0.18 per common share. The dividend will be paid on June 2, 2016 to all shareholders

Subsea 7 Profits Dip in Q1

Subsea 7 S.A. announced its financial results for the first quarter ending March 31, 2016, reporting revenues of $746 million, down 37 percent from the prior year period.

WCI's Toohey Applauds WRDA 2016 Bill

Waterways Council, Inc. (WCI) President/CEO Michael J. Toohey issued a statement regarding today’s mark-up and passage of the Water Resources Development Act (WRDA)

Contracts

POSCO Production at Indiana Ports to start in 2017

Officials from POSCO, the Ports of Indiana and community leaders gathered to break ground today on POSCO's new wire rod processing center at the Port of Indiana-Jeffersonville.

Ferry Conference: Technology Drives Vessel Advancements

On June 2-3, 2016,  the Ferry Safety and Technology Conference will be held in downtown Manhattan.   Throughout the world, the quickening pace of technological

Korean Shipbuilders Maintain Top Ranks, Despite Troubles

Korea's 'Big Three' shipbuilders are still the world's three biggest by order backlog, despite their troubled management, according to data from UK-based Clarkson Research Services.

Finance

Matson Announces Q2 Dividend of $0.18/Share

The Board of Directors of Matson, Inc. today declared a second quarter dividend of $0.18 per common share. The dividend will be paid on June 2, 2016 to all shareholders

Subsea 7 Profits Dip in Q1

Subsea 7 S.A. announced its financial results for the first quarter ending March 31, 2016, reporting revenues of $746 million, down 37 percent from the prior year period.

Baltic Index Dips on Weaker Rates for Bigger Vessels

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Thursday, hurt by lower rates for capesize and panamax vessels.

Energy

Subsea 7 Profits Dip in Q1

Subsea 7 S.A. announced its financial results for the first quarter ending March 31, 2016, reporting revenues of $746 million, down 37 percent from the prior year period.

India Instructs Disputed Tanker to Await UN Orders

India has instructed an Indian-flagged oil tanker that has been blacklisted by the U.N. not to discharge its cargo of crude oil from Libya's rival eastern government

Norway: Oil Industry Safety Deteriorated in 2015

The risk of accidents in Norway's oil industry rose last year after reaching record lows in 2014, a survey by the Nordic country's safety watchdog showed on Thursday.

Fuels & Lubes

Norwegian Escape Equipped with Alfa Laval Systems

Norwegian Escape, the first cruise ship in Norwegian Cruise Line’s new Breakway Plus Class, was delivered in October 2015. The 164,600 GT vessel, which boasts 19 decks and 4,

ExxonMobil: 5 Tips on Switching Fuels in ECAs

ExxonMobil has compiled five ‘top-tips’ to help vessel operators effectively switch fuels when entering and exiting Emission Control Areas (ECAs) without introducing maintenance issues.

New ClassNK Guidelines for Gas-fueled Ships

Classification society ClassNK has released the fourth version of its Guidelines for Gas Fueled Ships.   With the introduction of increasingly strict environmental regulations,

News

Matson Announces Q2 Dividend of $0.18/Share

The Board of Directors of Matson, Inc. today declared a second quarter dividend of $0.18 per common share. The dividend will be paid on June 2, 2016 to all shareholders

Disabled Fishing Vessel Towed to Maine

The 60-foot fishing boat Paulo Marc was towed by the crew of U.S. Coast Guard Cutter Moray after the fishing vessel became disabled Wednesday about 90 miles east of Portland, Maine.

Blacklisted Oil Tanker Returning to Libya

An Indian-flagged oil tanker is returning to Libya, the North African country's rival oil corporation said on Thursday, after its failed first attempt to export

People in the News

First Female Deputy Harbor Master at Port of Durban

One of the first three women in Africa to obtain a Marine Pilot open license in 2011, Pinky Zungu has again made history with her appointment as Transnet National

Gulf of Guinea Piracy a ‘Deep Concern’ -UN Security Council

Rising crime in Gulf of Guinea contrasted with declining East Coast pirates; Presidential statement condemns murders, kidnappings, hostage-taking, as UN Security

POSCO Production at Indiana Ports to start in 2017

Officials from POSCO, the Ports of Indiana and community leaders gathered to break ground today on POSCO's new wire rod processing center at the Port of Indiana-Jeffersonville.

Logistics

Baltic Index Dips on Weaker Rates for Bigger Vessels

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, fell on Thursday, hurt by lower rates for capesize and panamax vessels.

Philippines: Coordinated Patrols Needed to Protect Shipping

The Philippines has been discussing coordinated naval patrols on its southern maritime borders with Indonesia and Malaysia to protect shipping after attacks and kidnappings by Islamist militants,

Fitch: M&A, Not Alliances to Help Revive Container Shipping

The following statement was released by the rating agency: Mergers and acquisitions, rather than the historically more popular alliances, are inevitable to address

 
 
Maritime Careers / Shipboard Positions Maritime Security Maritime Standards Naval Architecture Pipelines Pod Propulsion Salvage Ship Electronics 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: 0.1688 sec (6 req/sec)