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Oil Trading Giants Are Buying Big Oil’s Refineries

Having amassed huge profits over the past two years, oil trading giants are on a buying spree to acquire refineries that the biggest international oil and gas producers are divesting as part of strategic portfolio realignment.

“The traders see an opportunity to end up with a plant that can run a slew of different crude oils,” Kurt Chapman, a board member of trader Levmet and former head of crude at Mercuria Energy Group, told Bloomberg.

Commodity traders thus gain direct access to a refinery to which they can send part of the crude they sell and become larger players on the crude options and futures market to hedge their exposure to physical crude oil, according to Bloomberg.

In recent months, the largest independent oil trading houses have acquired several refineries from Big Oil worldwide in consortia with other companies.

The largest independent oil trader, Vitol Group, last year signed a deal to buy 35% of the Saras refinery in Italy after reaching a deal with members of the Moratti family.

Vitol has also bid for the parent company of refiner Citgo Petroleum in the ongoing court-appointed auction, Bloomberg reported in June, citing sources with knowledge of the matter.

Another major trader, Trafigura, said in April that Rhône Energies, its consortium with Entara LLC, has entered into exclusive negotiations to buy the Fos-sur-Mer refinery and the Toulouse and Villette de Vienne terminals from ExxonMobil’s local unit Esso.

“The refinery will continue to be an important contributor to energy security in the region and would benefit from Trafigura’s global trading and logistics network,” said Ben Luckock, Global Head of Oil for Trafigura.

Glencore also made the list of the biggest oil traders buying refineries from Big Oil. In May, Shell reached an agreement to sell its refining and chemicals assets in Singapore to CAPGC Pte. Ltd., a joint venture company between Chandra Asri Capital Pte. Ltd. and Glencore Asian Holdings Pte. Ltd.

The commodity trading industry currently has the means to reinvest strategically in long-term deals and strategic decisions, according to consultancy Oliver Wyman. One winner move for reinvesting the profit windfalls could be to invest in assets, “which gives traders greater optionality and influence over the commodities they trade,” Oliver Wyman said in a report earlier this year.  

By Tsvetana Paraskova for Oilprice.com

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