Singapore oil traders end year on a whimper; “There’s no retrenchment by the companies. Traders are leaving essentially because they are not getting any bonuses”

PUBLISHED DECEMBER 02, 2013

Oil traders end year on a whimper

More than three-quarters of trading houses here won’t give bonuses this year amid market gloom

RONNIE LIM RONNIE@SPH.COM.SG

There will be no merry round of “musical chairs” this year-end for oil traders here – PHOTO: AP

[SINGAPORE] There will be no merry round of “musical chairs” this year-end for oil traders here. On the contrary, quite a few have bailed out in case their seats get yanked from under them, industry players tell BT. “The trading market has generally been very difficult. Trading costs are high, and there has been insufficient volatility and no clear market trends,” one trading executive lamented.With barely a month to go, and with most trading houses already starting to close their books, he reckons that physical oil volumes traded this year will be down 15-20 per cent on average, with paper volumes also trending 10-15 per cent lower. “There is no market for trading big volumes,” he said.

Bunker trading volumes are also down some 25-30 per cent, he estimates.

And this market gloom is being deeply felt, as he says that more than three-quarters of the trading houses here will not be giving bonuses this year. And those that will are likely to hand out envelopes that will feel half as heavy as last year’s.

“There’s no retrenchment by the companies. Traders are leaving essentially because they are not getting any bonuses,” the trading executive said.

Another senior trader agreed that “there’s no musical chairs this year unlike last year when some were able to switch to new, often better-paying jobs with sign-on bonuses. This is because there are no new trading entrants here this year which they can seek out, and those firms already here are not growing”.

Furthermore, the so- called “Wall Street refiners”, or financial institutions like Morgan Stanley and Goldman Sachs which were previously involved in the oil business, have also scaled back on this because of regulatory issues, he said.

“Essentially, trading conditions have remained difficult, and there’s not been an improvement over last year,” he said of the oil market which is still largely in backwardation. The latter refers to a market situation where the futures price of most oil products is lower in distant months than in the near delivery months.

Amid the current fallout, Arcadia Energy is reportedly withdrawing from physical oil trading in Asia and has given up its storage here. And following an earlier “migration” of its entire crude oil trading team here to commodities giant GlencoreXstrata, the oil trader’s clean products team has also followed suit.

“Quite a few of the other trading firms, including some Japanese houses, are also scaling down,” one trader said.

There has apparently also been trader movement at European houses like Lukoil and Gunvor, and at Chinese corporation PetroChina, the trading executive added.

On the brighter side, Singapore traders are looking forward to some stimulus to the market following the recent deal struck between Iran and six world powers to curb Teheran’s nuclear programme in exchange for limited sanctions relief.

“It’s a good sign,” the trading executive said, adding that it could see the potential resumption of Iranian oil exports in the new year.

Earlier US and European Union sanctions had slashed Teheran’s oil exports from 2.5 million barrels per day (bpd) to around one million bpd, and one trader told BT that he was looking forward to the resumption of some Iranian exports.

“Other than the prospect of Iranian exports, there is nothing much else at the moment to look to, except perhaps a pick-up in the global economy,” he said.