JP Morgan Asset Management has…
2023 was a tumultuous year…
Saudi Aramco is reportedly planning to postpone an initial public offering (IPO) of its energy trading business in what would have been one of the largest IPOs so far this year. Last year, Bloomberg reported that Aramco, Saudi Arabia’s main national oil company (NOC), was planning to list the business in late 2022 at a valuation of more than $30 billion.
The Saudi firm has decided to push back the IPO in order to complete the integration of the trading business with its U.S.-based refining business Motiva Enterprises LLC. It’s also likely that Aramco has decided to delay the listing due to the unusually quiet IPO market in Riyadh, with the country’s exchange having raised just $72 million from listings so far this year, a far cry from the nearly $4 billion it had managed to raise at a comparable point last year. The year-to-date haul is also the lowest since 2014.
It’s highly likely that the IPO would have drawn plenty of attention.
Dozens of giant commodity and energy traders have seen their profits explode since the pandemic and global energy crisis hit over the past few years thanks to their ability to leverage their storage facilities, global network of terminals and shipping fleets to cash in on supply disruptions, soaring energy prices and rising demand.
Vitol Group, the world’s largest commodity trader, generated record net income of $4.2 billions 2021, with rival Mercuria raking in $1.25bn. Vitol announced a major share buy back to the tune of US$3 billion as a way of rewarding the roughly 450 senior staff who own the company. Glencore Plc also enjoyed record numbers, as did Trafigura’s trading arm.
Smaller trading desks that lack the wherewithal and deep infrastructure networks of the giants were, unfortunately, unable to take advantage of one of the most volatile--and profitable--periods in the global energy industry.
But energy commodities trading is by no means the sole preserve of independent trading desks. Scores of Big Oil companies have set up secretive and sprawling trading divisions which frequently add billions of dollars to their bottom-lines. To wit, last year, energy trading desks by European giants BP Plc (NYSE:BP), Shell Plc (NYSE:SHEL) and TotalEnergies SE (NYSE:TTE) together made $37 billion of trading income last year
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.