Geneva will leave London behind and become the world’s most important trading hub for physical energy commodities, including oil, as leading companies relocate dozens of traders to Switzerland, according to industry executives.
The transfers threaten the UK capital’s leadership in physical crude and oil products, first established in the late 1980s, and come amid broader financial industry complaints about stiffer regulation, higher taxes and poor transport infrastructure in London.
The Geneva Trading and Shipping Association, the industry body, believes the Swiss city now “ties with London as Europe’s number-one oil trading hub”.
But oil executives said the balance was turning in the favour of the Swiss city. “The trend is less London and more Geneva,” said one trading house executive.
Trafigura, the world’s third-largest oil trader, is transferring a quarter of its London-based workforce to Geneva, including traders and sales staff, according to people familiar with the company’s plan. The trading house employs about 300 people in the UK, but about 80 will move to Geneva.
Vitol, the world’s largest energy trader, is moving its European natural gas and power teams to Geneva from London, transferring about 25 traders. The house, which will complete the move soon, employs about 200 people in London.
The departures come as BP reduces the size of its energy trading arm, the largest in London. The oil major last week said Henrik Wareborn, its head of crude oil trading, had left.
BP said it was “reducing the number of management layers”. Last month it said its trading profitability had been “eroded”.
Geneva and London have fought for dominance in physical energy trading since the first oil crisis in 1973-74, which saw the emergence of the initial cadre of oil traders in Geneva and Zug, another Swiss city.
In the mid-1980s, London started to gain business and by the 1990s the UK capital was eclipsing Geneva.
London remains a top trading centre and is home to the oil division of Glencore, the world’s largest commodities trader, the trading arms of BP and Shell, and the commodities desks dealing in physical oil of banks, such as Morgan Stanley .
But the current departures are part of a broader trend of trading houses starting their businesses in Geneva, particularly among the new generation of traders such as Gunvor and Mercuria, the world’s fourth and fifth largest by volume traded.
The trading arms of Total and Lukoil have been based in the Swiss city for years.
Geneva faces hurdles to continue its expansion, however. Oil trading executives complain of a lack of office space in the city suitable for an open-plan trading room.