According to the app, WiseNews, cash-rich commodity traders have been coveting assets such as refineries and distribution channels that help generate huge trading profits for energy giants. Traders are currently enjoying their most profitable period in history and are investing heavily in refineries. This is because owning these assets gives traders more options when conducting trades, increases their exposure to spot and futures markets, and helps them better understand supply gaps. At the same time, large energy companies are under pressure from their shareholders to reduce their investment portfolios, focus on assets with the highest ROI, and divest or clean up major pollution sources such as refineries.

There are many recent examples of this trend. Last month, Vitol Group, the world's largest independent oil trader, acquired assets from US refiner Citgo Petroleum Corp. Another joint venture in which Glencore is involved has agreed to acquire Shell's Bukom refinery in Singapore. A consortium, including Trafigura Group, is in exclusive talks to acquire France's Fos-sur-Mer refinery.

The gross margin for commodity trading is the second best year in history.

After securing a foothold in the refinery sector, traders have more options when deciding whether to transport certain grades of oil to their own refineries or elsewhere (such as the open market). This depends on which way will make more money.

Levmet board member and former head of crude oil at Mercuria Energy Group, Kurt Chapman, said, "Traders see an opportunity to ultimately have a plant that can produce multiple types of crude oil." In addition, owning refineries allows traders to be bolder in setting physical regional benchmarks and gives them more reasons to hold futures positions to hedge spot exposures, thereby playing a more important role in the swap and futures markets.

Owning refineries puts traders in a better position to reach supply agreements because refineries make up important buyers of crude oil. Ensuring these supplies also allows traders to get an idea of the quantity and timing of their competitors' goods, which helps with trade decision-making. Refineries recently bought by traders are usually located in major trading centers such as the Mediterranean and the Singapore Straits, allowing them to transport various types of crude oil. These transactions are usually stakes or consortia rather than direct acquisitions, as traders are most interested in obtaining crude oil purchasing rights for these plants.

Huge profits have given traders the capital to invest in assets such as refineries, as well as to form metal and agriculture teams. However, another key aspect of driving traders to invest in refineries is accessibility. Refineries around the world are being sold at extremely low prices, and although the profit margin is good, companies such as BP, Total (TTE.US), Shell, and ExxonMobil (XOM.US) continue to sell assets they no longer consider core businesses.

Large energy companies are also facing pressure from institutional investors to reduce their emissions. One option is to spend money upgrading refineries to improve efficiency or produce more environmentally friendly fuels, while another option is to completely divest refineries. Steve Sawyer, a consultant with Facts Global Energy, said, "Shareholders want companies to reduce greenhouse gas emissions, and one way to do that is to sell refineries." He also added that this does not actually have much of an impact on emissions reduction, as buyers will likely operate refineries in a similar manner.

It is worth mentioning that refining profit margins have always had strong cyclical trends, and large fixed assets with fluctuating profit margins may pose risks to leveraged traders. In the 1990s, Vitol Group's profits fell to near-zero levels, as it struggled to cope with the costs of upgrading the Come by Chance plant in Canada. In 2020, a difficult trading environment forced Gunvor Group Ltd. to close its loss-making refinery in Antwerp, Belgium, before selling off the asset.

However, although fuel consumption in developing countries continues to grow rapidly, the industry has slowed investment in new refineries as petroleum demand is expected to peak, so refinery profit margins may become more stable. Steve Sawyer pointed out, "We have been saying that while refinery capacity will surge from 2019 to 2025, there are few plans after 2025." "That is still the case now."