Citigroup to Sell Commodities Unit

Citigroup Inc. put its commodities unit up for sale in another retreat by the world’s largest financial services company from trading for its own account. The unit, Phibro Inc., is one of the biggest traders of oil and metals. It is controlled by Salomon Inc. and became part of Citigroup when its parent, Travelers Group Inc., merged with Citicorp in October. The announcement came as commodity prices hit their lowest level in more than two decades. Phibro’s condition today is a far cry from its heyday in the 1970s and ‘80s, when commodity investments benefited from high oil prices spurred by the Arab embargo and rampant inflation, which sent gold skyrocketing to $800 an ounce, more than double today’s price. Phibro also has links to silver trading that stretch back to the days of the Hunt brothers of Dallas, whose attempt to corner the market in 1980 sent silver to $50 an ounce. It now sells for $4.75 an ounce. The company has had recent successes too. Its knowledge of the silver market served it well as the broker for billionaire Warren Buffett when his firm, Berkshire Hathaway Inc., began to buy silver in July. The firm eventually bought 129.7 million ounces of silver--a fifth of known world supplies. Citigroup has reduced bond arbitrage trading at its investment banking unit after a $1.33-billion trading loss in the third quarter. Shares of New York-based Citigroup rose 75 cents to close at $49.25 on the New York Stock Exchange.