Vitol, Glencore dominate Russian oil trading
* Traders grab lion's share as rival Gunvor cedes positions
* Breakthrough for Glencore as it gets Rosneft invitation
* Vitol dominates Mediterranean trade, CEO meets Sechin
By Dmitry Zhdannikov
LONDON, Oct 9 (Reuters) - Swiss trading houses Vitol and Glencore have become the largest players in the Russian oil export market, dominating supplies from the world's biggest producer after a switch in Kremlin policy opened up the trade.
Between them, the world's two biggest oil traders will trade over 4 million tonnes of Russian oil worth over $3.2 billion in October, or over a third of the volumes that Russia will sell to Europe via its Baltic and Black Sea ports, according to Reuters calculations.
That marks a departure from how oil was sold only a few years ago, when Kremlin-controlled firms such as Rosneft or Gazprom Neft sold their oil mainly via Gunvor, a trading house co-owned by Russian businessman Gennady Timchenko.
"Everywhere you saw Gunvor before, Glencore is now written in capital letters. Vitol has also grown scarily big," a veteran Russian trader said. Vitol and Glencore declined to comment.
The oil industry, which has for years watched the Kremlin increase control over Russia's natural resources, is still divided over whether Gunvor surrendered its position deliberately or the change came after orders of some kind from the Kremlin.
Russian opposition figures have for years suggested Gunvor's success was due to close ties between Timchenko and Putin.
Both men denied that. Putin said he had never helped Timchenko, and Gunvor, which had revenues of more than $80 billion last year, said its success was due to competitive prices and the experience of its traders.
However, Gunvor has been left with almost no Russian crude to sell after Rosneft, which produces as much oil as Nigeria, awarded its tender to Vitol, Glencore and Shell.
Gunvor says it has deliberately cut exposure to expensive Russian oil and although it took part in the latest tender to buy crude for 6 months it did not offer the highest prices.
GLENCORE MEETS SECHIN
Rosneft says it awards tenders only based on the best offers for its crude. Vitol and Glencore have indeed offered the highest prices, outbidding rivals at the latest Rosneft tender.
The big difference, however, was that Glencore was allowed to bid at such tenders for the first time, sources say.
"Glencore had been as banned a word at Rosneft as the dollar was in the Soviet Union," said a Rosneft insider.
Rosneft declined to comment on changes to its tender practices, which happened soon after Sechin, previously deputy prime minister, took over as Rosneft's chief executive.
Several insiders said Glencore's relatively modest positions in Russian oil up until this year were the result of rocky relations between Sechin and Russian aluminium tycoon Oleg Deripaska.
Glencore has a minority stake in Deripaska's aluminium giant RUSAL. Coincidentally or not, Rosneft started treating Glencore differently as Gunvor's dominance shrank.
"Glencore was the biggest absentee at Rosneft's tenders and it was clearly an anomaly," said a source familiar with the developments. Glencore contacted Rosneft a number of times seeking to overturn the practice and be included in tenders.
A meeting earlier this year between Glencore and the Rosneft board, including Sechin, has finally won the trader the right to participate in tenders as it said it could pay top dollar.
"As soon as Glencore got invited, they started winning as they offered some of the most competitive prices," he said.
VITOL MEETS SECHIN
Apart from Rosneft's barrels, Glencore markets in Russia cargoes from mid-sized firm Russneft and small producers. Vitol sells cargoes from Kazakhstan and mid-sized producers.
Unlike Glencore, Vitol was a regular at Rosneft's tender but the latest results surprised even the industry's veterans.
"I cannot remember anyone being so dominant in my 20 years plus on this market", said a veteran Russian oil trader.
Thanks to the Rosneft tender, Vitol has acquired 40 percent of Russian exports from the Black Sea in October and that will likely last at least until March. Russian oil is the main sour crude grade in the Mediterranean market after the ousting of Iranian barrels due to Western sanctions.
Details of the shipments point to an even bigger dominance by Vitol as many Russian producers' cargoes go straight to their European refineries. That limits the amount that can go to the spot market, thus increasing Vitol's power to dictate prices.
"There is nowhere to run. If you need Urals (oil) in the Med you have only one number to dial," said another trader.
Vitol is known in the industry for taking big bets such as its heavy involvement in the Libyan revolution last year when it sent tankers to the rebels in the middle of a civil war.
Prior to winning the Rosneft tender, Vitol's long-time CEO Ian Taylor, a Briton, met Sechin, industry sources said.
"I cannot think of anyone else who would dare to take such a dominant position," a veteran participant in Rosneft's tender said. "You can win but it can also backfire spectacularly if the market turns against you."
- Tweet this
- Share this
- Digg this
- Exclusive - Apple, Google agree to pay over $300 million to settle conspiracy lawsuit
- Brazilian Congress passes Internet bill of rights
- Boy and girl on Korean ferry drowned with life jackets tied together |
- Ukraine forces kill up to five rebels, Russia starts drill near border |
- Ukraine forces kill up to five rebels; Russia starts drill near border |