Eni and Mercuria agree to join forces in commodity trading

Italian oil company Eni SpA and commodity merchant Mercuria Energy Group Ltd. signed an agreement to join forces in trading, seeking growth in an area that has seen huge price swings and profit opportunities during the war in Iran.

The two firms will be combining their main trading books for various commodities including oil, liquefied natural gas and biofuels under a new entity headquartered in Geneva, according to statements on Wednesday.

It’s a big move for both companies — integrating Eni’s physical energy supply chains with Mercuria’s trading expertise could potentially allow them to compete more effectively with larger rivals such as Shell Plc or Vitol Group.

“This partnership brings together two highly complementary organizations,” Mercuria chief executive officer Marco Dunand said. The venture will combine “physical energy flows with world-class trading, logistics and risk management capabilities.”

For Eni, the tie-up could allow it to challenge its larger European rivals Shell, BP Plc and TotalEnergies SE, which are among the largest oil and gas traders in the world, buying and selling far more than what’s produced by their own assets.

For Mercuria, which long has trailed rivals like Vitol, Trafigura Group and Gunvor Group in its physical trading volumes, the deal offers an opportunity to supercharge an expansion push, especially in LNG. The fuel is seen by many in the industry as a key growth commodity, but it has faced setbacks, with Steve Hill, a former senior Shell executive whom it hired in 2024, leaving this year.

Eni and Mercuria expect the joint venture to be operational in 2027, with the two firms equally represented at the senior managerial level, according to a spokesperson for the Italian oil giant. Commodity traders won’t be made redundant, the spokesperson added.

Price volatility caused by the Iran war has created opportunities for companies that buy and sell energy in large volumes. Shell and BP posted first-quarter earnings that far exceeded expectations, thanks to a surge in profit from their extensive in-house trading operations.

Mercuria’s first-half profit jumped 88%, putting it on track for one of its best-ever annual results. For several months, the trading house has been doing deals to grow its access to physical commodities and processing assets, including $1.2 billion to help finance the buyout of a copper mining company in Kazakhstan and a deal to buy an oil refinery and petrol stations in Argentina.

Trading activities for both parties will be exclusive to the JV for the identified commodities, except cases that require joint approval, the spokesperson said, adding that Eni does not currently expect refinery assets to form part of the venture.

Talks between Eni and Mercuria to form a joint venture were first reported by Bloomberg in January.

(By Jack Wittels)