India’s Essar Oil picks Trafigura, BP for $1 billion oil-backed loan

Essar Oil has long relied entirely on funding from Indian banks. (Reuters)
Updated 20 March 2018
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India’s Essar Oil picks Trafigura, BP for $1 billion oil-backed loan

LONDON: Essar Oil has picked Trafigura and BP to lend it $1 billion to be repaid with cargoes of refined products as the Indian refiner’s new owners seek to diversify the firm’s financing base, sources with direct knowledge of the matter said.
Russian oil major Rosneft, fund UCP and Swiss commodities trader Trafigura bought Essar Oil’s large refinery, 3,500 fuel stations and infrastructure for $12.9 billion last year.
Essar Oil has long relied entirely on funding from Indian banks while the new shareholders want to reduce exchange costs by adding alternative financing sources and directly use dollars to buy its oil instead.
Late last year, the refiner began talks with traders to raise cash in exchange for refined products such as gasoline and gasoil delivered over three to four years. It would be the refiner’s first major multi-year prepayment.
The sources said that Trafigura and BP were jointly working to structure and then syndicate the loan with banks in the next few weeks.
BP and Trafigura declined to comment, while Essar was not immediately available.
Existing and possible new US sanctions will complicate discussions, banking sources said.
Kremlin-owned Rosneft has been under US sanctions since Russia’s annexation of Crimea in 2014 and the refiner also runs significant oil volumes coming from Iran and Venezuela.
While the international oil embargo on Iran was lifted in early 2016, US restrictions on dollar use in connection to Iran remain. President Donald Trump has also repeatedly criticized the nuclear pact with Tehran and threatened to stop extending US sanctions relief.
Trump’s nomination of Iran hawk Mike Pompeo as the new secretary of state has fueled fears of an end to sanctions relief.
The US has also considered oil sanctions on Venezuela.


Egypt stock market plunges as retail investors take flight

Updated 19 September 2018
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Egypt stock market plunges as retail investors take flight

  • Biggest index drop in Egypt since mid-2016
  • Saudi Arabia outperforms in Gulf

LONDON: Egyptian stocks tumbled to their lowest level this year on Wednesday as retail investors took flight.
A sharp rise in Suez Canal revenues, a major foreign exchange earner for the country, was not enough to quell investors concerns about the strength of the currency.
The main Egyptian stock index lost 3.8 percent which some fund managers blamed on generally negative sentiment toward emerging markets worldwide as well as more local speculation about possible currency devaluation.
“Our channel checks suggest the sell-off in the Egyptian market is local retail and institutions driven, on currency fears and speculation over a further round of devaluation,” said Vrajesh Bhandari, portfolio manager at Al Mal in Dubai, Reuters reported.
“Selling is further intensified as margin calls are triggered and technical support levels break down. The country canceled three consecutive Treasury auctions, citing investors’ unrealistic yield demands.”
Egypt’s Suez Canal revenues rose to $502.2 million in August up 6.7 percent from a year earlier according to official data released on Wednesday.
Elsewhere regional stock markets closed mostly lower with the exceptions of Abu Dhabi which edged 0.2 percent higher and Saudi Arabia, the best regional performer, which rose by 1.1 percent.
Saudi stocks are benefiting from the strong oil price which eased slightly yesterday but still hovered just under $79.
OPEC and some other oil producers including Russia will meet in Algeria on Sept. 23 to discuss how to allocate supply increases within their quota framework to offset the loss of oil exports from Iran following the introduction of sanctions by the US.
Those measures will come into force on Nov. 4 and data suggests that buyers are already retreating from Iranian crude purchases.
A key question for the oil price as well as regional stock markets in the weeks ahead will be the extent to which other Gulf oil exporters can compenaste for the loss of Iranian supplies by pumping more.