- Sale includes any and all use of the storied Phibro name
- Occidental closed the trading concern at the end of 2014
Phibro LLC, the commodities firm that helped invent the modern oil market, is getting a new lease on life.
The storied trading house, which was shuttered after 113 years in 2014 by then-owner Occidental Petroleum Corp., has restarted in Stamford, Connecticut, under the direction of ex-Morgan Stanley co-head of commodities Simon Greenshields. He now follows a long line of the firm’s famous traders, such as Marc Rich, Tom O’Malley and Andy Hall.
Greenshields, who left Morgan Stanley in January 2015, said the firm will initially focus on North American energy, trying to capitalize on volatility and market dislocations caused by the rapid growth in oil and gas production over the past five years. He said his firm can fill a void created by banks reducing their commodities risk exposure amid stricter regulations.
“There’s a liquidity void and right now there are good opportunities for putting together a strong brand with a deep talent pool,” Greenshields said in a phone interview. “There’s quite a lot of capital that’s interested in participating in the development of such a business.”
Greenshields declined to say how much capital he has raised or how much he paid for Phibro. Nick Elliot and Thomas Funk, two of Greenshields former colleagues at Morgan Stanley, are joining Phibro as partners.
Founded in 1901 as Phillip Brothers, Phibro traded commodities such as metals and chemicals. In 1973, the firm dove into the crude oil trading business when the Arab oil embargo caused prices to soar and left U.S. refineries searching for supplies.
Phibro’s original crude traders included Rich, who would later gain infamy for breaking sanctions against Iran and fleeing the country to avoid charges, and O’Malley, now the chairman of PBF Energy Inc. O’Malley reminisced fondly of his early days at Phibro in a 2014 interview.
“These were people primarily of European origin who had decades, if not centuries, of family experience in metals trading,” he said. “Copper, lead, zinc on the non-ferrous side. Steel, iron ore, coke, coal. Everything. They were extraordinary people and I believe my ability to understand what’s happening in marketplaces comes from the education that I got at Phibro.”
Phibro gained notoriety in 2009 when it gave a $100 million pay package to Hall, then it’s chief executive officer. The trading house was owned by Citigroup Inc. at the time, and the compensation ignited a controversy over pay at bailed-out banks. The firm was sold to Occidental that year, and shuttered at the end of 2014. Hall now runs his hedge fund, Astenbeck Capital Management.
Melissa Schoeb, a spokeswoman for Occidental, said by e-mail that the acquirer purchased any and all use of the Phibro name.
Under Greenshields, Phibro will look to acquire assets and trade in both physical commodities and derivatives, Greenshields said. For example, he is in discussions about a brownfield fertilizer plant in the U.S. Nitrogen-based fertilizer production uses natural gas, which is being extracted at record rates in the U.S., as a source of hydrogen that’s combined with nitrogen from the atmosphere to form ammonia.
“Despite the fact that there’s cheap natural gas, the U.S. is a big net importer of fertilizer, which doesn’t make sense,” he said. “You look at the price of European gas, and yet we’re importing fertilizer from the Black Sea. It seems contrary to fundamentals.”
Greenshields told Bloomberg TV hosts Alix Steel and David Gura in an interview today that he expects oil supply to exceed demand for a long period of time, keeping prices low. The Organization of Petroleum Exporting Countries used to be able to use the threat of production cuts to keep prices high, but at its meeting in December it abandoned that strategy.
“After the last OPEC meeting, those days are gone,” Greenshields said. “There’s no fear of OPEC anymore.”