Should oil trading companies possess their own tankers ?

The purpose of this report is to understand if it would make sense for oil trading companies to purchase and operate oil tankers. The report begins by defining the current concept of trading. In fact, trade is defined as the action of buying and selling goods. The concept has evolved from prehistoric times to today where the trade industry involves millions of transactions completed each day. Moreover, the current report provides an overview of commodity trading in Switzerland and Geneva, which are popular for their commodity trading sector as Geneva is home to the oil trading industry. This project provides a snapshot of the crude oil sector with details about historical and current trends from different parts of the world such as in the United States, where oil production has been increasing drastically over the last years, or in Asia, where the demand for oil is constantly growing. Furthermore, information on key traders of the oil industry in terms of oil traded volume is established. Then, the report exposes the shipping market by looking at five different types of tankers shipped by oil trading companies and the most commonly used oil routes. Further, the profitability of each tanker under a time charter party is analyzed by comparing both capital and operating costs with freight rates. It is observed that smaller tankers were more profitable in 2012 and 2013 than larger tankers. Moreover, it results that operating and financial costs are fairly predictable and stable, while freight rates have the specificity of being volatile and unpredictable. Furthermore, it is discussed how major oil trading companies relate to shipping in terms of tanker ownership. Generally, oil traders don’t purchase oil tankers but prefer to charter them through time charter. It is also discovered that oil trading companies are slightly heading to a medium asset strategy as their fixed assets increase constantly. Moreover, the report discusses the differences between purchasing a tanker in the second hand market or in the new building market. Finally, it is explained that oil tankers provide optionality in terms of time, location and lot size