Analysis: Vitol's dominance grows in cash European oil markets

Tue Feb 19, 2013 8:34am EST
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By Dmitry Zhdannikov and Jessica Donati

LONDON (Reuters) - Top oil trader Vitol is increasingly dominant in European oil markets, taking a stranglehold on Urals crude to the Mediterranean and the naphtha and gas oil markets that rival traders say make it extraordinarily influential over prices.

Traders said the scale of Vitol's grip over the Urals crude market to the Mediterranean and European naphtha, used in the petrochemical industry, is unprecedented. The Swiss trader with revenues of $297 billion is also becoming a dominant player in the barge market for European heating oil and diesel, or gasoil.

"I cannot remember anyone being so dominant in my 20 years plus on this market," said a veteran Russian oil trader of the Urals market. "BP, Shell, Gunvor, Total all tried to play big in the past decade but Vitol's current play simply dwarfs it".

Vitol declined comment for this article.

It is not unusual for oil majors or big trading houses to build large positions in over the counter European oil markets and such strategies are not restricted by regulation.

Data compiled by Reuters shows Vitol marketed more than half of the standard 140,000-tonne cargoes of Urals delivered via Black Sea export terminals over the past three months.

Its stranglehold was even greater than its half share of those cargoes might suggest because most owners of other shipments did not offer them for sale on the spot market, preferring to process the oil at their own refineries.

The scale of Vitol's dominance in European naphtha trade is even greater and has grown over the past year, culminating in the purchase of 52 cargoes in December, about 85 percent of the volume in the short daily trading "window" operated by price assessor Platts.   Continued...

A sign is pictured in front of the Vitol Group trading commodities building in Geneva Oct. 4, 2011. REUTERS/Denis Balibouse