DAKAR/LONDON (Reuters) - Swiss industrial group Klesch has agreed that Barclays (BARC.L) will supply crude oil to its German refinery in a deal worth hundreds of millions of dollars a month that boosts the bank's drive to increase its commodities business.
New regulations have forced many of the biggest banks in commodities to scale back their activities, especially proprietary trading.
But some, including Barclays, are expanding in areas such as oil supply deals by offering them together with working capital packages while refiners seek new ways to streamline costs under pressure from shrinking margins and an expected rise in the cost of capital.
The group's head, Gary Klesch, said Barclays had won business previously done by Glencore Xstrata (GLEN.L).
"We switched from Glencore to Barclays," he told Reuters.
Klesch, who also invests in mining, power generation and chemicals through several companies, did not give details of the contract, saying only that it took effect on November 8.
Based on the current benchmark Brent prices, the contract for the 100,000 barrel per day refinery is worth more than $300 million a month, according to Reuters calculations.
Barclays and Glencore declined to comment.
The new agreement is the third such deal for Barclays in less than two years following agreements to supply a Hawaiian refinery and Stanlow, the second-largest British refinery.
"On financing, we have started to get a critical mass. People know that we are capable of executing these deals," Mike Bagguley, head of commodities at Barclays, said earlier this month. RSUM
"It works well with the energy markets. It means that banks can help producer clients and also with jobs and the real economy," he added.
The deals to supply Essar and the Hawaiian refinery came as part of working capital solutions offered by Barclays with the bank becoming the holder of oil and products at the plants, thus helping the refiner to ease the burden on capital.
The Klesch Group, which has combined revenues of over 5 billion euros ($6.7 billion), agreed to buy the Heide refinery from Royal Dutch Shell (RDSa.L) in 2010 as the oil major sought to trim its refining portfolio.
The plant, in northern Germany, in the past has been supplied with crude from a German oilfield called Mittelplate as well as from the North Sea.
The refinery mostly produces middle distillates like diesel and heating oil for the local German market.
($1 = 0.7491 euros)
Reporting by Emma Farge in Dakar and Dmitry Zhdannikov in London; Additional reporting by Jonathan Leff in New York; Editing by Anthony Barker