OTC Snaps up Rival Oil Brokerage as Consolidation Heats Up

Commodities broker OTC Europe has agreed to purchase rival Oil Brokerage in the latest consolidation in a sector squeezed by rising competition and smaller margins.

 

OTC Europe, a subsidiary of OTC Global Holdings, said it concluded its purchase of Oil Brokerage, a 29-year-old, London-based firm with some 70 staff, on Tuesday in an effort to expand its global footprint.

 

"They're very big in areas we simply just weren't in yet, very big in areas that (are) growing geographically such as London and Singapore," OTC Global's President and co-CEO Joseph Kelly said of Oil Brokerage in an interview with Reuters.

 

Kelly declined to disclose the value of the deal. OTC Holdings, established a decade ago in the United States, is the world's largest independent institutional commodities broker.

 

The acquisition advances OTC's goal of becoming a one-stop shop for clients who want to take part in evolving and increasingly global commodities markets, Kelly said.

 

He pointed specifically to rising U.S. exports of liquefied petroleum gas (LPG) and diesel to Europe, U.S. fuel oil exports globally and the physical European light end and fuel oil markets as areas for expansion.

 

"The idea at the end of the day is that we will be this one place where you can do anything you need in commodities ... whether it's moving a physical cargo, hedging, trading futures," Kelly said.

 

Prior to this, OTC's London operations included crude oil products and derivatives, refined products and derivatives including middle distillates, gasoline cracks, biofuels and physical and financial LPG and natural gas liquids.

 

OTC also has offices in Chicago, Geneva, Houston, New Jersey, Louisville and New York.

 

Oil Brokerage was founded in 1988 as a broker of physical gasoline in Europe, and later expanded to include physical and paper biofuels, naphtha and fuel oil.

 

OTC now has a global portfolio of 20 companies, a network that could make the group more competitive in a market that has seen increasing consolidation amid the crude oil price rout and the popularity of electronic trading.

 

Oil Brokerage itself closed its physical distillates desk in 2014, as did rival Marex Spectron.

 

Rival brokerage Tullet Prebon acquired London-based oil PVM Oil Associates in a $160 million deal in 2014, and cut its own staff shortly afterwards. Last year, it finalised a 1.11 billion pound ($1.47 billion) deal to buy bigger rival ICAP Plc's global hybrid voice broking and information business.


($1 = 0.7539 pounds)

(By Ahmad Ghaddar and Libby George; Editing by David Evans)