HPCL to start global oil trading desk
A trading desk will give HPCL flexibility to enter and exit markets as and when required, and it will take care of hedging and trading activities
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Mumbai: State-run Hindustan Petroleum Corp. Ltd (HPCL) is planning to set up an international oil trading desk, two company officials aware of the matter said.
The desk would either be set up in Singapore or London.
“We are thinking of setting up an oil trading desk. We are working on the details which will be finalised in the next six-12 months. Given Singapore is the trading hub, we are more inclined to it,” said one of the two officials cited above, on condition of anonymity.
“A trading desk gives us the flexibility to enter and exit markets as and when required. It will take care of our hedging and trading activities. At such desks, operations take place through the day, helping traders watch out for arbitration possibilities and support agreements between companies and investors,” the second HPCL official added, also declining to be identified.
HPCL did not respond to an email questionnaire.
“A trading desk at Singapore allows better access to information on crude oil and ensures operational flexibility. This will be a good move for HPCL now as crude prices are low,” an analyst with a domestic brokerage said on condition of anonymity.
Refineries use crude oil as raw material, and for HPCL, it accounts for more than 90% of its expenses. HPCL processed 17.23 million tonnes of crude in 2015-16 against 16.18 million tonnes in 2014-15. Singapore is an established destination for oil trading where both buyers and sellers are present, and first-hand information will help companies such as BPCL to buy spot crude oil cheaper.
HPCL is the second oil marketing company planning to set up an international trading unit. State-run Bharat Petroleum Corp. Ltd (BPCL) is in the process of training its staff for a similar facility in Singapore. A BPCL official said the company will not hire traders but train its own officials for better results. Indian Oil Corp. Ltd (IOCL), the country’s largest refiner and marketer, has a trading desk in Delhi.
For Indian companies, West Asia is a natural source of crude oil supply because of the region’s proximity.
The Singapore office may help HPCL trade in energy derivatives, international financing and other joint ventures that the company may plan in the future, the first official added. The official added that HPCL had similar plans around eight years ago, which were put on the back burner as the company wanted to study the prospects of setting up a trading desk in detail.