June 11, 2024 [Reuters]- Global commodities trader Glencore has won a tender to supply crude oil to Prax’s 113,000-barrel per day Lindsey oil refinery in Britain, replacing rival trader Trafigura, three sources with knowledge of the deal told Reuters.

The deal bolsters Glencore’s oil trading operation, and follows the recent joint acquisition of Shell’s Singapore refinery and petrochemical assets with Chandra Asri.

UK-based independent oil company Prax selected the most “commercially advantageous offer” in a tender process that started in the fourth quarter of last year, according to a statement issued to Reuters. The company declined to disclose details of the agreement, including the winner.

Neither Glencore nor Trafigura commented on the status of their respective deals with Prax when asked by Reuters.

Trafigura had supplied crude oil and refinery feedstocks to the Lindsey refinery since 2021, when Prax acquired the plant from French oil major TotalEnergies.

Weaker refining margins in recent months have weighed on refiners’ profits, which can make it harder to finance crude purchases.

Profit margins for refineries in Northwest Europe have been sapped by lacklustre demand for diesel in particular, while rising global supply and slow U.S. demand are also capping gasoline margins.

Refineries typically prefer to pay for crude cargoes at a later date using credit lines from banks, as this allows them time to sell the fuels yielded from the refining process to raise funds.

But major trading houses can offer financing solutions on favourable terms that smaller independent firms wouldn’t have access to from banks, making such supply deals attractive for both counterparties.

A corporate filing uploaded in March on a UK government website, which listed Prax Lindsey Oil Refinery Limited as a “buyer” and Glencore Energy UK Ltd as the “seller”, suggests that the framework of a deal was in the pipeline several months ago.

But major trading houses can offer financing solutions on favourable terms that smaller independent firms wouldn’t have access to from banks, making such supply deals attractive for both counterparties.

A corporate filing uploaded in March on a UK government website, which listed Prax Lindsey Oil Refinery Limited as a “buyer” and Glencore Energy UK Ltd as the “seller”, suggests that the framework of a deal was in the pipeline several months ago.