Morgan Stanley (MS.N) is exiting an oil marketing deal with the European refineries of Britain's Ineos Group Ltd INGRP.UL at the end of the month, as PetroChina Co Ltd (0857.HK) (601857.SS), which owns half of the refineries, takes over the job, traders said.

"Morgan Stanley's deal expires on March 31. It's a done deal," said a trader with direct knowledge of the situation.

State-owned PetroChina's trading arm Chinaoil will assume the marketing role to secure crude and market refined fuels for the two European refineries jointly owned by Ineos and PetroChina, with a combined daily processing capacity of 420,000 barrels.

The new marketing role is part of PetroChina's ambition to double its global trading and marketing of oil -- including crude oil and refined fuel -- to 8 million barrels per day by 2015 compared with the 2010 level, a target outlined by the company chairman Jiang Jiemin last May.

PetroChina, Asia's largest oil and gas producer that started its oil trading in 1993, has over the past two decades nearly closed the gap with big league traders like Morgan Stanley.

Its oil trading scored another year of record profits in 2011, two company trading executives told Reuters, with one pegging the number at 4.5 billion yuan ($711 million). PetroChina does not separately report its oil trading results.

"It's logical for PetroChina to take over the job as the purpose of (PetroChina) buying up the refineries is to expand the company's global trading portfolio," said a second trader with knowledge of the deal.

A Hong Kong-based Morgan Stanley spokesman was not able to immediately comment when contacted by Reuters. A PetroChina spokesman wouldn't confirm Chinaoil taking over the Morgan marketing role but reiterated the company's goal of having a presence in the entire oil value-chain.

OPERATING NEAR FULL CAPACITY

Despite a weak refining margin environment in Europe, Ineos's plants are currently operating around 90 percent of capacity.

"Refining business is not good in Europe, but the Singapore plant is doing extremely well. So it's about optimizing the whole system across the regions," said the second trader.

Morgan Stanley entered the deal in 2007 with Ineos to provide crude, market refined fuel and provide risk management for the British group's refineries in Grangemouth, Scotland and Lavera in France.

PetroChina bought half of the refining assets last year for $1 billion, the Chinese energy giant's third refinery acquisition after similar investments in Singapore and Japan.