Morgan Stanley receives $1bn offer for physical oil trading unit

Investment bank Morgan Stanley has received an offer of just over $1bn for its physical oil trading unit, according to various media reports on Wednesday.

Separate claims in The Wall Street Journal, Financial Times and CNBC, suggest Castleton Commodities, a trading house backed by hedge fund managers Paul Tudor Jones and Glenn Dubin, had put over $1bn on Morgan Stanley's table.

All parties concerned have declined comment on the media reports.

Castleton has form in negotiating with investment banks looking to divest their commodities units, having previously bid for JP Morgan’s Switzerland-based commodities business. It eventually lost out to Mercuria on that particular deal.

Morgan Stanley has been proactively seeking a buyer for the oil trading unit following disappointing returns on equity, as a succession of banks including UBS, Barclays and Deutsche Bank retreat from the physical commodities trading arena.

Previously, Morgan Stanley had attempted to sell the unit to Qatar’s sovereign wealth fund but eventually shook hands with Russia’s Rosneft.

However, the latter deal was not given regulatory approval by the US government in wake of Ukraine-related sanctions on Russia.

The latest deal, should it materialise, would include both contracts and existing inventories, according to the Financial Times. The bank has already divested its fuel distribution and compressed natural gas export ventures.

While Morgan Stanley continues to trade crude oil, natural gas and distillates, it is looking to retreat from mercantile businesses in the energy sphere.