Eni forms trading arm to cope in volatile markets
Thursday, 19 January 2012 | 00:00
Italian oil and gas company Eni has opened a new trading arm to encompass all its tradeable physical assets and cope with increasingly volatile and liquid markets, the chairman announced.
Eni Trading will be responsible for asset-backed trading and portfolio management across divisions, taking inspiration from rival oil companies that have already set up independent trading arms.
"Looking at our peers, we could see that more value could be extracted from our assets," Marco Alvera, the chairman of Eni Trading, told reporters in a roundtable.
Demand by customers seeking increasingly complicated hedging and other solutions to avoid exposure to volatile energy prices helped drive the shift in favour of asset-backed trading, he said.
The new unit will guide a shift away from traditional brokering and provide a single platform for investment in people and trading technology, he said.
The headquarters of ENI Trading will continue in London, where it sees some advantages to Geneva.
Many other companies, such as Trafigura, have moved to Geneva. French major Total also handles most of oil trading from its Totsa unit in Geneva.
"Geneva has more tax benefits, but we see more industrial benefits in being here," Alvera said.
Volatile commodity prices, dimmer growth prospects and tougher regulation are forcing some companies to question the outlook for trading raw materials afteR a decade-long boom.
In December, Credit Agricole stopped trading commodities and slashed its financing of the market, making the most sweeping commodity cuts so far among European banks strained by the euro zone debt crisis.
Alvera conceded that a crucial source of liquidity provided by banks was thinning as financial players pull out of oil and commodities markets but said the shift was temporary.
"I can understand why banks are reducing their exposure, but I don't think it's structural. It seems to be cyclical," he said.
For the time being, the key growth area in terms of trading volumes is in Asia, where demand for west African oil is on the rise, Alvera said.
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