Trafigura chief sees oil fall as ‘growth opportunity’

The dramatic move in oil prices has been an opportunity for growth, according to Trafigura CEO Jeremy Weir Keystone

Swiss commodity group Trafigura has seen strong returns from its oil trading division so far in 2015 and intends to remain privately owned, its chief executive has said in his most detailed comments since taking charge of the company last year. 

Speaking ahead of an appearance at the Financial Times Commodities Global Summit in Lausanne, Jeremy Weir said that Trafigura had no intention of transforming itself into an asset-heavy miner or oil producer, unlike rival Glencore, which bought Xstrata in 2012. 

“The dramatic move in oil prices has been an opportunity for growth,” said Mr Weir, who was appointed chief executive after Trafigura co-founder Claude Dauphin stepped aside during treatment for ill health last year. Mr Dauphin remains executive chairman. 

Commodity houses, including Glencore, Vitol and Mercuria, have this year enjoyed the best environment for oil trading since 2009. The 50% drop in prices since June has allowed them to buy oil cheaply for storage. Traders lock in a profit through the simultaneous sale of futures contracts with different prices and delivery dates. 

Trafigura is the world’s third-largest independent oil dealer, trading about 2.5m barrels of crude and refined products a day – the equivalent of almost 3% of global demand. 

It is also a major trader of metals and bulk commodities and has a presence in other energy products like liquefied natural gas. Mr Weir said that its bulk commodities business, including coal and iron ore, had suffered from the collapse in prices this year. 

Expansion plans 

Trafigura executives, who have rarely given interviews, have been trying to be more open as they look to tap new investors for funding. Trading houses have also come under scrutiny for lack of financial disclosure and often opaque dealings in emerging markets. 

Mr Weir was speaking as Trafigura tapped the bond market for €550 million (CHF564 million) to fund expansion plans and possible acquisitions. The eurobond will yield 5% for five years, the company said at its Geneva headquarters. 

While the company is eyeing possible acquisitions, Mr Weir said that the firm had no intention of following in the footsteps of Glencore which has expanded its mining arm since its public listing in 2011. “We’re not here to build a massive mining entity,” Mr Weir said. 

He said that Trafigura might consider an initial public offering of Puma Energy, the oil storage and logistics company that it jointly owns with Angola, although the trader wishes to maintain overall control of the operation. 

Puma last month bought the closed Milford Haven oil refinery in Wales with plans to turn the site into a major storage facility, as the UK becomes increasingly reliant on fuel imports to satisfy domestic demand. 

“An IPO is one of the possibilities [for Puma],” Mr Weir said. “[But] we want to stay the largest shareholder.” 

Copyright The Financial Times Limited 2015