(Bloomberg) -- Kuwait and Bahrain are setting up oil trading arms as they seek to cash in on recent refinery expansions and emulate the success of some of the region’s biggest producers in buying and selling fuels.
Kuwait Petroleum Corp. and Bapco Energies, Bahrain’s state oil refiner and marketer, aim to begin trading operations in Dubai by early next year. Both firms plan to increase sales of diesel and jet fuel, company officials said at a conference in Fujairah, in the United Arab Emirates.
The companies are expanding at a challenging time, when diesel demand and margins are low. Still, they’re following neighbors including Saudi Arabia, the UAE and Oman, which have boosted their trading of fuels, rather than ceding that business to traditional commodities houses and energy majors. Refinery expansions in the Middle East enable producers there to beat rivals outside the region on price and cost.
“It’s clear that the major producers in the region are now setting up their own trading operations, which makes a lot of sense,” said Torbjörn Törnqvist, chief executive of commodity trading giant Gunvor Group Ltd., speaking at the conference this week. “The market sometimes feels very crowded.”
Bapco Energies will use the trading arm to adjust to the current environment by more actively managing the sale of its refined products, said Shaikh Ebrahim Al Khalifa, the company’s executive vice president for business development. That will include more diesel shipments to Europe, he said.
The company has partnered with TotalEnergies SE to trade output from the nearly 90-year-old Sitra refinery after upgrades at the plant double diesel production capacity.
Kuwait Petroleum Corp. is reviving a plan to establish a fuels-trading business. It has increased sales of diesel and jet fuel to Europe after expanding its Al Zour refinery on the Gulf coast, said Emad Al-Kandari, an official in the company’s international marketing department.
Its new entity, KPC Trading, has already taken office space in Dubai. It will also handle sales of products from Kuwait’s joint-venture refinery with Oman’s state oil company at Duqm in that country, as well as fuels produced by other countries, Al-Kandari added.
Kuwait Petroleum has already sent several staff from its international marketing division to train with OQ Trading, part of Oman’s state oil company, Bloomberg has reported.
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