Nomura Commodity Desk Liquidation Blamed For Commodity Weakness

Reuters is reporting that Nomura is "downsizing" its commodities trading desk, resulting in some "job losses" - that is a modest euphemism. According to an insider, virtually the entire London commodity desk at Nomura was shown the door over the past several days, with deep cuts globally. This process however did not start today, and has been going on for a few days. As a result market expectations emerged earlier that there are commodity-related liquidations originating at Nomura. These are now likely very much unfounded, yet per two traders, the weakness in commodities is driven on expectations there is an legacy position unwind bottleneck. To an extent this is true, and the main reason why the WTI-Brent spread collapsed yesterday was due to the unwind of opposing bets by Nomura. Said unwinds are however now said to be completed, with little if anything left for liquidation, and we expect that the spread will promptly revert to its recent historical level in the $14-18 range, as the oversupply issues at Cushing persist as evidenced by today's DOE update. Additionally, the technical overhang on crude will soon be lifted after trading desks realize the order flow from Nomura has ceased.

The official version per Reuters:

Japan's largest brokerage, Nomura Holdings Inc, is trimming its global commodities and energy-trading business and cutting jobs just when the markets are booming and competitors are expanding to capitalise on the opportunity.

The bank gave no exact reason for the move but a Tokyo-based company spokesman said expected job losses would be in the "low double-digits".

The bank's trading personnel were told late on Tuesday that the company was downsizing the business, particularly for oil and soft commodities, and affected staff had already been informed, two company sources told Reuters.

The move follows a reshuffle announced on March 7, when the company appointed its first female chief financial officer.

"The oil-trading team in Asia made money last year and it is a shock that they are down-sizing the operation," said one of the sources, who declined to be identified because he is not authorised to speak to the media. "It has more to do with re-strategising the bank's business as a whole."

Asked to comment, a Singapore spokesman for the company said: "Nomura continually reviews its cost base to ensure that it is appropriately-sized for market conditions."

The firm has an energy trading team of at least four in Asia, including Executive Director Shaun Lim, the head of the desk who was hired over a year ago, a distillates trader, and several support staff.