Commodities daily: New kid on the oil trading block

Commodities daily: New kid on the oil trading block
BP, the world’s largest energy trader, is reducing the size of its once mighty trading arm to counter a drop in profitability. At exactly the same time, Moscow-based TNK-BP, half-owned by the British oil major, is launching its own global trading arm.
As a senior oil trader in Geneva puts it: “Goodbye BP, hello TNK-BP!”
Coincidence? It very well could be, but timing matters a lot in commodities. TNK-BP, by intention or just pure good luck, is setting itself to fill some of the vacuum that BP will leave in the highly profitable business of trading energy commodities. Whether it could profit from the opportunity will depend very much on its senior traders.
The talk of the day in Geneva, the world’s capital of crude oil trading, is the re-emergence of two veterans of the publicity-shy commodities business as senior executives of the new enterprise. Graham Sharp will head the day-to-day business of the TNK-BP operation as senior vice-president for international trading. Above him will be Jonathan Kollek in the role of senior vice-president for sales, trading and logistics.
Both cut their teeth in the tough world of physical commodities trading in the 1980s at the same company: Marc Rich + Co, the Swiss-based trading house, which after a management buy-out became today’s Glencore. Both are experts in the same area: oil markets “east of Suez” – the industry’s jargon for Asia.
The CVs of both men read like a history book of the past two decades in the oil trading industry. After leaving Marc Rich + Co in 1992, Mr Kollek, along with Steve Hellman, founded his own trading house – Projector SA, which rapidly became one of the main players in the global oil market, although it has since disappeared. He left to join TNK in 2002, becoming the company’s unofficial “oil guru”. He once said about his commodities job: “Anything that comes out of the ground, I move it.”
While Mr Kollek’s role in the new enterprise did not surprise fellow traders, the return of Mr Sharp has stunned others in Geneva as he theoretically retired from active business three years ago. With a long career in oil, traders say he will play a critical role in the new company.
Almost 20 years ago, while Mr Kollek was starting Projector, Mr Sharp was also leaving Marc Rich + Co to co-found with the celebrated oil trader Claude Dauphin what would become a dominant force in oil and metals: Trafigura. He retired from the trader in 2007 to pursue “philanthropic activities”.
Reunited and aiming to build a fully-fledged, global trading house, they could redraw the map of energy trading. Their stated aim is to trade about 2m barrels a day in three to four years. If realised – and rival traders say it is a very ambitious target – TNK-BP would jump into the ranks of the world’s largest traders, only behind the independent traders Vitol, Glencore and Trafigura and the trading arms of a few big oil companies.
As one trader put it, depending on how the story turns, there is a small chance that by 2015, the apprentice – TNK-BP – could have left its master, BP, behind.