European refiners will increasingly choose to have oil supply deals with banks to reduce price volatility risks and ease burdens on working capital, Barclays
"We see more transactions like this for clients looking to mitigate their capital and commodity risks," John Eleoterio, global head of commodities structured origination at Barclays, told Reuters.
"There are opportunities in Europe and globally, with a particular emphasis in Europe and the U.S. market," he added.
Big commodities trading banks such as Goldman Sachs
Banks have also agreed to finance oil inventories to minimise the burden on refiners' balance sheets amid stubbornly high oil prices.
This week, Barclays became the first bank to do a similar large-scale deal in Europe with India's Essar Energy
Barclays will hold the inventories of crude oil and petroleum products at Essar's Stanlow, the second largest UK refinery, and will also supply crude to the refinery for three years.
"The nature of the agreement is more dynamic than a traditional crude supply in that Barclays will be storing crude and managing the commodity volatility associated with the inventory under the crude supply agreement," said Eleoterio.
The Stanlow deal is bigger than any other deal Barclays had previously, including in the U.S. market. It will be holding roughly 3 million barrels of product in storage at Stanlow.
"In this difficult refining margin environment, refineries have significant working capital burdens. This is a tool that works well for them and allows them to optimise the refinery costs," he said.
"This type of product is something we look to expand on a global basis," said Eleoterio.
Europe has seen a number of refiners closing or being turned into storage facilities in the past years due to poor refining margins.
Earlier this year, Europe's largest independent refiner Petroplus filed for bankruptcy.
Traders have speculated that sovereign debt problems in Southern Europe might encourage independent refiners there to seek to optimise their supply deals.
Eleoterio declined to say where else in Europe Barclays was looking to clinch similar supply and inventory deals.
