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Macquarie maps new strategy for physical oil trade

It joins the likes of Morgan Stanley, JPMorgan and Barclays in trading physical barrels and oil swaps, but traders said Macquarie distinguishes itself by having one team to trade across the barrel, unlike most traders and banks which have teams dedicated to each product in Asia.

‘The key for us is to have the flexibility to look at different products and focus on the one that delivers the most attractive returns under the market conditions prevailing at the time,’ said David Heard, Macquarie’s Head of Oil & Gas Asia.

Macquarie said this week it has hired a team of six, including four experienced traders, to capitalise on the growing Asian market.

‘If we think that there is an interesting market structure for distillates and the strategy requires us to take up the necessary short- to medium-term storage to facilitate it, we would look at that,’ Heard said by telephone from Sydney.

Most of Macquarie’s trading activities are now centred on the oil product swaps market in London and Asia, driven mainly by volumes from hedging for its customers, which include end users and producers. It also does some proprietary trading.

TRADING TARGETS

The bank aims to leverage relationships with customers such as refiners by supplying them with crude. It plans to supply distillates and fuel oil for clients who are consumers such as airlines, utilities, mining companies and shipowners.

Its team, led by industry veteran Steven Taylor, were all hired from trading firm Masefield, which recently agreed to a takeover by European trader Arcadia. They started work at Macquarie in early February but no physical trades have been seen yet.

Macquarie also has nine derivatives traders in London, New York and Sydney.

‘When we prepared our analysis for the first year, we expect our trading volumes to be quite balanced between crude and products,’ Heard said.

‘The business plan will be to look for opportunities as they arise — we have no specific trades that we are going to put on right now.’

It sees trading potential in the increasing refining capacities in Asia, in the face of growing demand from emerging economies, particularly China and India.

‘We see a particular opportunity in physical oil trading from an Asian viewpoint, as the region consolidates its leading position based on the growth of substantial new refining capacity, feeding the region’s high-growth economies, and taking a greater share of markets as far afield as Europe and the west coast of the Americas,’ Heard said.

The company is also active in other energy markets such as coal, power and natural gas. It recently bought a U.S.-based physical gas marketing and trading firm, Constellation.