Crude oil’s worst slump since the financial crisis means profits for Geneva’s army of traders.
After years of steady prices, the crash has brought back the volatility on which traders thrive. While the fall in benchmark Brent to five-year lows has rocked economies fromRussia to Venezuela, the world’s biggest commodity trading houses, which buy and sell about a third of the world’s oil from the Swiss city, are relishing the return to a bear market.
Lower prices have cut financing costs, provided an opportunity to lock in profits by storing fuels and heralded the return of big price swings that can help firms from Vitol Group to Trafigura Beheer BV generate higher returns.
“Commodity traders are in a much more optimistic mood these days,” Roland Rechtsteiner, a Zurich-based partner at Oliver Wyman, an industry consultant. “They all hold a lot of inventory, they hold a lot of infrastructure and this can only be monetized when there is volatility. So these are good times for them.”
As banks including JP Morgan Chase & Co. (JPM), Deutsche Bank AG and Barclays Plc (BARC) have exited or pulled back their physical commodity activities, trading houses have purchased assets such as storage tanks, pipelines and refineries. These holdings give traders more options to take advantage of the sudden shift in prices.
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