London’s commodities traders are following their Swiss counterparts to Dubai as the emirate transitions from an outpost focused primarily on crude oil to a major trading hub for energy.
Dubai has been trying to attract commodities companies for a long time, investing in the banking infrastructure and developing futures exchanges. These efforts helped to drive a change after the Kremlin invaded Ukraine. Many traders of Russian raw material were rushing into the city to establish businesses as European Union sanctions and Swiss sanctions made dealing with Moscow more difficult.
London is the capital of commodities, but more traders are moving to Dubai or expanding their business from there. The growing number of merchant counterparts, as well as the low taxes, are all enticing traders to move or expand from London. Dubai offers other lifestyle benefits, which are becoming increasingly important in attracting top talent.
According to sources familiar with the situation who requested anonymity, Hartree Partnerships LP, and Freepoint Commodities LLC have been among the companies that moved energy traders and senior managers to Dubai in the last year. This shows that historic trading centres like London are losing out to Dubai’s increasing appeal.
The boom is also part of an overall boom in Dubai and United Arab Emirates which has been boosted by an influx of wealth from abroad. Property prices have been boosted by the arrival of crypto millionaires and bankers from Asia, as well as wealthy Russians who are hiding their assets.
Jonathan Funnell is a partner with executive search firm Sidley Marion. He said that “we have seen many well-known hedge fund recently opening offices in Dubai, as well as independent commodity merchants.” The tax incentives are obvious, but some people feel that Dubai could become a major commodities trading hub.
Dubai is the new Switzerland for Russian Commodity Traders
Dubai has been courting commodity companies for decades and established a Free-Trade Zone in 2003. Since then, it has introduced gold and oil contracts while regional banks have increased their offers to finance trade flow. Companies that do business with Russian producers are able to do so in Russia without being subjected to the same restrictive sanctions as those imposed by the EU, Switzerland and the US.
The time zone is also a benefit for traders of European gas and power, as they can avoid early morning starts. They are also able to keep more profits at a time when the industry is booming. Dubai benefits from being close to the biggest oil and gas producing countries in the world, such as Saudi Arabia, Abu Dhabi, and Qatar.
As a trading center for commodities, it is still much smaller than other places such as London, Singapore and Stamford.
Hartree, for example, is a good example of a company that has moved to Dubai. According to sources familiar with the situation, it is expanding its Dubai office to 20 employees from 12. This includes people from London. Several members of the European power team, including Brendan Mycock, the head of the power desk at the company, have already moved. Gas traders are also expected to move.
Freepoint is also a major trader in the region. Michael Walter, Senior Managing director, was formerly based in London but now works out of Dubai. Andre Dvoretski – formerly with Swedish utility Vattenfall Ab – started working as a senior energy broker for Freepoint in Dubai in April according to his LinkedIn page.
Hartree & Freepoint declined comment.
You don’t require as many people to be physically present on the continent because of how European gas and power is traded.
Anders Porsborg Smith, managing director of Boston Consulting Group, said that gas and power trading can be done with great flexibility due to the high degree of digitalization.
Similar moves have also been made in the oil industry. People familiar with the situation said that Yaoyao Liu was formerly based in London, but now trades from the Dubai office of Vitol Group. Vitol Bahrain remains the regional hub.
The company refused to comment.
Ian Lowitt is the Chief Executive Officer at London-based Marex Group. He said that there was a great deal of interest in sending staff to Dubai. “For us, it will become an important center. Clients are moving there and big commodity players are from the region.”