* Trading house pushes into market dominated by energymajors
* U.S. spot supplies expected to help dislodge monopolies
* Traders eye massive arbitrage profit margins
By Oleg Vukmanovic and Henning Gloystein
LONDON, June 6 (Reuters) - Commodities trading giantGlencore Xstrata's entry into high-margin liquefiednatural gas (LNG) trading could mark a turning point for amarket long constrained by the grip of major oil companies onlong-term supplies.
Glencore has lured a four-person team of LNG traders inLondon and Singapore from Morgan Stanley, which isreducing its commodity trading.
Dealers said the move could trigger a second wave of newentrants keen to exploit price differences between U.S.,European and Asian gas markets.
LNG is among the fastest growing commodity markets asincreasing volumes of super-cooled gas are shipped from theQatar, Nigeria, Indonesia and other countries.
Most LNG trade operates on static long-term agreementscontrolled by the major oil companies and a few producercountries.
But trading houses such as Glencore and arch rival Vitol arebetting that the advent of U.S. LNG exports from 2015 spurred bya boom in shale gas will create space for new entrants.
"What has stifled trading is that nobody could get anythingmuch to trade," the former head of LNG at a major Europeanenergy company said.
"The introduction of U.S. volumes linked to (benchmark U.S.gas price) Henry Hub changes everything. The upside is huge andthe entry cost is just some salaries," he said. "It's time forthe trading houses to give it a push again."
"LNG will continue to be the fastest growing sector of theinternational energy business for many years," Vitol says on itscorporate website.
The trading houses also hope to exploit spot tradingopportunities to Asia at a time when European gas trading desksare struggling from low prices and demand in economicallydepressed Europe.
The U.S. shale gas boom and near record low prices at $4per million British thermal units (mmBtu) has led companies tobuild LNG export terminals, boosting the supply of cheapuncommitted volumes, which traders can sell to Asia for as muchas $20/mmBtu.
That spread, or arbitrage, as well new supplies from theU.S. and Australia later this decade, should boost spot tradingliquidity, and potentially iron out price differences betweengeographic regions.
Cargoes of LNG can change hands for as much as $50 millioneach and cash is gushing in to industry leaders such as Shell, Total and BG Group. Their overalltrading profits are increasingly supported by LNG trade.
Commodities trading houses such as Glencore, Vitol andGunvor have made efforts to challenge that dominance.
"Glencore is the type of company that others will follow...so hopefully it is a sign of people coming back into themarket," an executive with a top LNG shipping company said.
Morgan Stanley's LNG trading desk was seen as a big strengthof its commodities trading division.
Yet many banks are downsizing their commodities desksbecause of toughening regulations on proprietary trading, wherethe banks trade on their own behalf instead of for clientsseeking to hedge energy price risk.
Three of Morgan Stanley's LNG traders are based in Londonand one is based in Singapore, three sources with knowledge ofthe move said. Information on the timing of the moves was notimmediately available.
Morgan Stanley and Glencore declined to comment.
"The LNG guys were the star performers of the European powerand gas desk and management tried hard to keep them on board,"one trader said. "It will be difficult to replace these guys."
The traders joining Glencore are Maggie Jia, Rajiv Panicker,Lou Montilla and Luis Lesmes, other dealers said.
While trading activity on the spot LNG market is rising,barriers remain as the sector is still dominated by long-termdeals between buyers, such as European and Asian utilities, andsellers such as Qatar, the world's top LNG exporter.
New players need access to specially-designed LNG tankers,to the LNG source and in some instances to terminals.
For a financial player, Morgan Stanley has been particularlyactive trading LNG, especially in sales to Argentina and Spain.Vitol won a Argentina contract last year.
Glencore (GLEN)
