Vitol emerges as big winner from volatile energy markets
World’s biggest independent oil trader made $1bn in profit in first half of year
Vitol, the world’s biggest independent oil trader, has emerged as one of the biggest winners from volatile energy markets after making profits of about $1bn in the first half of the year.
The company, which is owned by roughly 350 partners, saw its net income surge by 80 per cent to about $1bn in the first six months to June, up from $550m in the same period in 2018, according to people familiar with the matter.
The results highlight the ability of Vitol, which is led by chief executive Russell Hardy, to use insights from its vast trading operations to react to market conditions and capture discrepancies in oil and gas prices around the world.
The company handles more than 7m barrels a day of crude and refined products such as gasoline and diesel — the equivalent of the daily oil demand of France, Germany and Spain combined.
Its record of strong profitability has allowed the London-headquartered company to consistently pay out large dividends to top traders and executives. It returned $1bn to senior staff via share buybacks last year.
Vitol declined to comment on the figures.
The company’s performance was broad based, and not focused in one particular segment of the company, according to one person with knowledge of the results.
As the crude oil price rose by about $10 a barrel during the first half of the year, it increased the value of barrels held in storage by Vitol, they said. At the same time persistently low interest rates made it cheap to carry stocks, which are generally financed with debt. Price volatility also created trading opportunities and Vitol’s growing liquefied natural gas business performed well.
Vitol delivered more than 7.8m tonnes of LNG in 2018 and expects to increase its volume to at least 10m this year.
Vitol, whose partners are spread across trading hubs in London, Geneva and Houston, is not the only trading house to have prospered in the first six months of the year. Geneva-based Gunvor had a “good” half year, according to one person with direct knowledge of its performance, helped by favourable conditions in the European gas market. Meanwhile Glencore flagged a “particularly strong result” from its oil trading in the six months to June on the back of “supportive physical commodity” markets.
However, senior traders say market conditions have been more difficult in July and August, when Brent sank to a year low of $56 a barrel as US-China trade tensions added to fears about flagging demand. Prices have been particularly volatile in the past week, after attacks on Saudi Arabia’s key oil facilities cut production by more than half in the kingdom.
Mr Hardy replaced Ian Taylor, the British businessman who transformed Vitol from a small Dutch fuel trader into a group estimated to be worth as much as $20bn, as chief executive in 2018.
In an interview with the Financial Times earlier this week, Mr Hardy described the attack on Saudi oil facilities as a “shock”.
“The nature of the incident is very, very worrying indeed, as to where it came from and how it occurred, and the fact that it came as such a big shock,” he said.
He was speaking after Vitol announced a trading joint venture with ENH, Mozambique’s national oil company, to market LNG and natural gas.