Vitol has emerged as one of the biggest winners from crude’s rebound in the first three months of this year, as the world’s largest independent energy trader had one of its most profitable quarters after betting fears of a global recession were overdone.
The company, which is led by chief executive Russell Hardy and chairman Ian Taylor, had recorded net income of almost $600m in the first quarter, according to two people who have seen the privately held trader’s results.
The figures underline the lucrative advantage Vitol and its competitors can reap from their vast trading operations, which look to capture differences in oil and fuel prices around the world. Vitol handles more than 7m barrels of crude and refined product trades a day – the equivalent of the daily oil demand of France, Germany and Spain combined.
Insights gleaned from moving millions of barrels around the world can give trading firms a head start in spotting when the oil price has become divorced from the underlying picture for supply and demand.
Mercuria, one of Vitol’s smaller Switzerland-based rivals, had a record first quarter, according to one person directly familiar with their accounts. BP, Shell and Glencore, whose traders compete with the likes of Vitol and Trafigura, have also said that trading buoyed their first-quarter earnings. Trafigura reports results next week.
Many commentators and analysts argued that oil’s tumble in the final quarter of 2018 had been exacerbated by forced selling by banks who had arranged a large number of hedges for companies in the booming US shale sector.
The 100m barrel-a-day global oil market was also swept up in fears for the global economy which saw US equities drop by double digits in the fourth quarter. Brent crude oil, the international benchmark, plummeted from a four-year high of $86 a barrel in October to near $50 a barrel by Christmas. It then rallied almost 40 per cent to near $70 a barrel by the end of March, before peaking above $75 a barrel in April. It has since fallen back to $60 a barrel.
Vitol, which is owned by approximately 350 senior partners spread across the oil-trading hubs of London, Geneva, Singapore and Houston, is not the only trader to have successfully ridden the volatility in the world’s most important commodity over the past six months.
Vitol and Mercuria declined to comment.
The oil market has broadly tightened so far in 2019 as US sanctions against Iran and Venezuela – combined with that country’s economic and political collapse – have sharply reduced supply. Yet since reaching a high for the year in April, oil has slid almost 20 per cent as traders have warned US shale supplies are still growing fast just as the US-China trade war stirs concerns about demand.
The results show the extreme volatility in oil markets – which have been roiled by the competing forces of growing supplies from the US shale boom, restricted output caused by US sanctions on Iran and Venezuela, and concerns about the global economy in the last six months – have been a boon for fleet-footed trading houses.
However, one person briefed on Vitol’s performance so far in the second quarter said that trading conditions had been more challenging. Mr Taylor, who last October predicted that Brent crude would average about $65 a barrel this year, told Bloomberg this week that the company had enjoyed a strong first quarter but did not reveal how profitable it had been. The stellar first-quarter profits follows two relatively difficult years. So far in 2019 Brent crude oil has averaged $66 a barrel.