BGC Radix sees Asia oil broking market growth

SINGAPORE (Reuters) - Asia's oil broking market is recovering from the financial crisis, with trade volumes and profits improving from 2008 levels, but further growth could be hampered by a saturated industry, an industry veteran said.

Richard Tan, Managing Director of brokerage BGC Radix Energy, said further consolidation of the oil swaps market is possible, and the firm has diversified into less traditional areas such as tanker broking.

"The Singapore market is saturated and there are too many brokers here already," Tan said at the Global Reuters Energy Summit in Singapore. "There are many mid-sized shops here that can survive on relatively low-cost and minimal revenues, focusing on a single product or two," he said adding that this was unlike London, where there are only three or four big companies.

Tan estimates Asian oil broking volumes grew 20-25 percent in 2009 versus 2008, and another 5 percent in first-quarter this year versus the whole of last year.

The ongoing debt crisis in Europe has not made any dent on Asian energy markets, he said, adding that volumes have held steady so far.

"The fear factor is there because the last crisis hasn't been that long ago, but so far there has not been any impact," he said.

"In fact, volumes in the money markets have gone up due to the volatility in currency markets," added Tan, who sold his firm Radix to U.S.-based BGC Partners Inc just over two years ago.

BGC Partners Inc (BGCP.O), one of the world's leading inter-dealer brokers, are active in the global fixed income, interest rates, foreign exchange, equity derivatives, credit derivatives, futures and structured product markets.

MID-DISTILLATES LEAD

For BGC Radix, the best performer was middle distillates, which accounted for about 40 percent of its revenues, followed by naphtha and gasoline that contributed about 30 percent and fuel oil, which yielded 20 percent. Its new physical tanker broking division that accounted for more than 10 percent.

There was some consolidation in the market in the past two years, where companies such as GFI, Spectron and Japan's Nittan closed their oil-broking desks, but new firms such as Man Financial have opened.

Tan said the saturated energy swaps market has led to the firm diversifying its business beyond traditional energy swaps broking.

The firm started its tanker division about a year ago, broking for both clean and dirty vessels, and has plans to further develop this department to include liquefied petroleum gas (LPG) and petrochemical tankers, as well as to move into the tanker sales and purchase business.

"We moved into the tanker broking business last year and we have expanded from one to four brokers now, and we hope to grow it to be of similar size to our energy-broking division in the next two to three years," Tan said.

Another area of growth, he added, is to set up an energy broking desk in London to complement its Singapore team, having hired one staff to broke freight swaps mainly for dry bulk routes.

The firm has also been on the lookout for an energy-broking team to handle all the oil products for the past six to nine months, but has yet to find the right group.

"It's an ongoing exercise and we have not given ourselves any timeframe. We need to find the right people, at the right price, to enhance our team here in Singapore," Tan added. (Editing by Ramthan Hussain)