• 55%
    European cars run on diesel
  • 34%
    Refinery yield from a barrel of crude

Markets

Bolstered by legislation aimed at removing sulphur, Europe is the largest market for automotive diesel. Nearly half of all diesel cars are bought in the continent. Fifty-five percent of European cars run on diesel, compared with just 5% of US cars use diesel.

European diesel demand far outstrips its local refining capacity. This shortfall has had far-reaching implications for refining economics worldwide. When refiners identified this demand for mid-distillate production they invested in additional capacity. 

This came on-stream just as economic growth stalled. Oversupply, mounting inventories, subdued demand and new refining capacity combined to create weaker pricing conditions for diesel markets.

There are now signs of recovery. Europe has lost a significant portion of its refining capacity. Inventories are declining. The growing demand for gas oil in emerging economies, especially in the power sector, is diverting international supply away from European markets.

Jet fuel prices too are strengthening again after several years in the doldrums. Civil passenger numbers - a key determinant of airline demand - recently returned to pre-recession levels. Airbus and Boeing are predicting 5% annual growth in passenger numbers until 2030.

Both markets remain susceptible to environmental regulation. Increased fuel efficiency will dampen demand. Biofuels will factor increasingly in both diesel and jet fuel blends.

Case study
OilAndPetroleumProducts

Fuelling African copper production

Our middle distillates desk is one of the leading global traders in its range of products. We service the entire supply chain from refinery to storage terminals to end-user.

Products

Our middle distillates trading teams cover jet fuel, diesel and gas oil.

Regulators worldwide are focusing on reducing sulphur content to improve quality and minimise pollution. As growing environmental awareness changes fuel specifications, low-sulphur fuel is becoming the norm for automotive applications.

Since 2007, only low-sulphur (ULSD) diesels have been available in Europe and the US. However, in Africa, South America, across Asia, in Australia and the Far East, the higher sulphur gas oil remains popular for power generation and heavy-duty engines. We trade in both sectors.

We also trade paper to manage our physical positions. We use OTC derivatives, futures and options to hedge contingent and actual exposure so that we can deliver physical commodities to our customers at a competitive, stable price.

Case study
OilAndPetroleumProducts

Fuelling African copper production

Our middle distillates desk is one of the leading global traders in its range of products. We service the entire supply chain from refinery to storage terminals to end-user.

Capabilities

Relative prices between mid-distillate products vary enormously between regions. We can trade anywhere. We can blend our product to meet local specifications.

As global traders we have the flexibility to respond to shifts in demand in different locations.  We trade low-sulphur and high-sulphur distillates interchangeably.

We are able lock in physical arbitrage opportunities as they appear in different regions.  We can export barrels to the Americas, Africa, Asia, Europe - wherever is the most attractive location for that fuel.

We lease storage globally. We use our tankage to blend products to local specifications and premium priced fuels.

We use derivatives both to manage our own exposure in the physical market and to improve pricing flexibility for our customers. To take just one example, we recently assisted a Korean refinery with exposure to the US benchmark by buying product off the US price and hedging our physical exposure in the swap market.

Case study
OilAndPetroleumProducts

Fuelling African copper production

Our middle distillates desk is one of the leading global traders in its range of products. We service the entire supply chain from refinery to storage terminals to end-user.

Infrastructure

Our main trading desks are in Houston, Geneva and Singapore. Individual teams focus on geographic regions and share knowledge and ideas. Every major strategic decision is discussed internationally.

The overall aim is for every barrel to move to the best-priced location. We are at our most effective when we coordinate our activities.

Because of the links between gasoline and diesel pricing we liaise closely with the gasoline desk. Where customers are demanding more than one product we take advantage of co-freighting opportunities. We work closely with the biodiesel traders to provide blends that meet sustainability criteria.

We interact with other parts of the Company to bring customers integrated supply chain solutions. In Africa for instance, Puma Energy provides the logistics to deliver our diesel so that mining companies can power their machines. The metal and concentrates desks are potential buyers for their output.

Where customers don't have sufficient storage to buy in quantity we lease floating storage vessels to provide prompt supply. They can load direct to their tanks.

We spot-charter and time-charter a wide range of tonnage through our wet freight department. For physical arbitrage, we charter large tankers.

We lease storage units globally and have significant tankage at all the major pricing centres.

Case study
OilAndPetroleumProducts

Fuelling African copper production

Our middle distillates desk is one of the leading global traders in its range of products. We service the entire supply chain from refinery to storage terminals to end-user.