LONDON Trading house Vitol believes physical oil assets in the United States may have become a bit too pricey, potentially cooling appetite for them among trading houses that once viewed the U.S. oil industry as a prime acquisition target.
Two years ago, as the U.S. shale oil boom flooded the world with excess oil and the country's drivers began fuelling up in record numbers on the cheaper gasoline, trading houses described U.S. assets as a "Klondike" gold rush.
Now, Vitol chief Ian Taylor says trading houses are being crowded out of potential purchases and that they have even been lured into selling some holdings in a market he describes as "priced at some of the highest multiples in the world."
"Private equity and U.S. finance will continue to make the United States a place where a lot of money is invested, it's extremely efficiently done," Taylor told the Reuters commodities summit. "I'm not necessarily sure it suits traders."
Last month, Vitol announced the planned sale of its Permian Basin crude oil unit to pipeline operator Sunoco Logistics Partners LP (SXL.N). The sale sees Vitol giving up a roughly 2-million barrel crude oil terminal in Midland, Texas, and a crude oil gathering and mainline pipeline system in the Midland Basin.
Vitol has been a key player in the physical trading markets out of the United States, and was the first to export a cargo of U.S. crude oil following the lifting of the export ban late last year.
Trading houses previously targeted assets like these to bolster trading operations, but Taylor said the offer was too good to overlook – and that the sales would not impact Vitol's participation in the physical trading market, noting Houston still had the largest headcount of any individual Vitol office.
"It could be that we're making a mistake," Taylor said of the sale. "But they were good opportunities to sell assets."
(Reporting by Libby George; Editing by Mark Potter)