Citigroup to start trading physical Canadian crude: sources

Wed May 14, 2014 9:34am EDT
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By Nia Williams

CALGARY, Alberta (Reuters) - Citigroup Inc (C.N: Quote) plans to start trading physical Canadian crude oil, three sources have told Reuters, setting itself up to jockey with banks and traders to fill the vacuum left by other Wall Street giants offloading physical commodity businesses.

Three participants in the Canadian crude market, who declined to be named because they are not authorized to speak to the media, said Citi is in the process of preparing for physical trading of the most liquid Canadian grades.

That would likely include Western Canada Select heavy blend, the de facto Canadian benchmark, as well as sweet grades.

A spokesman for Citi declined to comment.

Citi's expansion into the physical market bucks the recent trend of big U.S. banks retreating from commodities trading as tighter government regulations eat into profits.

JPMorgan Chase & Co (JPM.N: Quote) is preparing to sell its physical commodities business, including a collection of long-term leases on more than 6 million barrels of storage tanks in Hardisty, Alberta.

Morgan Stanley (MS.N: Quote) is selling its global physical oil trading business, including its Canadian division, to Russian state-run oil company Rosneft (ROSN.MM: Quote).

"There has been this negative attention but it seems there's still space to maneuver and to operate profitably, and to serve the needs of their clients," said Raymond James analyst Daniel Marchon. "Citi would not be getting into this if it was not important to their institutional clients."   Continued...