Royal Dutch Shell Plc agreed to buy
Morgan Stanley’s European natural gas and power-trading portfolio in a deal
that doesn’t include the bank’s traders.
Shell Energy Europe Ltd. will
acquire Morgan Stanley’s book of physical and financial gas and power
contracts, the energy producer said in an e-mailed statement Friday. Shell, the
second-biggest oil company by revenue, didn’t disclose the value of the
transaction.
Trading oil and gas helped Shell beat analysts’ earnings forecasts in the quarter
ended March 31 as it profited from storing crude to sell later at a higher
price. Shell’s trading business also allows it to sell more natural gas than it
produces, helping the company take advantage of differences in prices around
the world.
“Shell have been seeking to further
build their presence in European power and gas for some time and this
acquisition allows them to pick up market share quickly,” Shaun Smart, a
principal associate at Commodity Appointments, said Friday by e-mail. “It’s interesting
to see Morgan Stanley leave the market because, along with Goldman Sachs, they
have traditionally been the bank most tied to commodities.”
The transaction didn’t involve any
personnel, Sarah Bradley, a spokeswoman for Shell, said by e-mail.
Banks
Exit
Morgan Stanley, which employed about
15 traders on its power and gas desk, was said to be winding down the business
in May, a person with direct knowledge of the matter said at the time. The
bank’s exit from trading power and gas in Europe follows similar moves by
Deutsche Bank AG, Bank of America Corp. and Barclays Plc in the past two years.
About a quarter of the gas and power
moves tracked globally by Commodity Appointments in the three months through
March were away from banks, Smart said. Banks that remain in European power and
gas markets have had to become more client-focused, he said.
“I would be surprised if Goldman and
Citi et al left the market as there remains a natural position in the market
for banks and their services, from both a liquidity and customer flow point of
view,” he said.
Increased scrutiny by regulators
including the U.S. Federal Reserve and politicians has prompted major banks to
cut back or abandon their commodity businesses. JPMorgan Chase & Co. sold
the bulk of its physical trading operations to Mercuria Energy Group Ltd. last
year for $800 million.
Shell, BP Plc and Total SA are the
world’s biggest energy traders, handling enough crude oil and refined products
every day to meet the consumption of Japan, India, Germany, France, Italy,
Spain and the Netherlands
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