Vitol Said to Post Highest Profit Since 2011 on Volatility

  • World's top oil trader said to post net income of $1.6 billion
  • CEO has said Vitol benefited from market that favors traders

Vitol Group BV earned $1.6 billion last year, the most since 2011, as the world’s largest independent oil trader profited from price swings in the energy market, according to a person familiar with the matter.

As oil-producing companies and energy-rich nations suffered amid the rout in crude and petroleum-product prices, closely held Vitol benefited from a market that Chief Executive Officer Ian Taylor earlier this year said “favors” traders.

Oil traders such as Vitol, Trafigura Group Pte, Glencore Plc, Gunvor Group Ltd., Mercuria Energy Group Ltd. and Castleton Commodities International LLC are profiting from increased price volatility. They are also filling storage to take advantage of contango -- a situation where future prices are higher than current levels, allowing investors to buy oil cheap, store it in tanks and lock in a profit for a later sale using derivatives.

The combination of contango and oil price swings allowed Vitol, which handles enough crude and refined products to meet the combined needs of Germany, France, Italy and Spain, to increase net income by 15 percent from $1.39 billion in 2014. The 2015 profit is the company’s fourth highest ever, only trailing earnings posted in 2006, 2009 and 2011.

Taking Writedowns

Vitol’s operating profit rose 22 percent to $1.82 billion last year, said the person who asked not to be named because the figures are confidential. While Vitol only publicly releases its traded volumes and revenue, it does provide financial information to its lenders and some other groups.

Andrea Schlaepfer, a Vitol spokeswoman in London, declined to comment.

In an interview in February, Taylor said that Vitol, which celebrates its 50th anniversary this year, would report net income for 2015 above that earned in 2014. However, he said the company wouldn’t match the record of 2009. The trading house, which is owned by its senior staff, planned to take writedowns in its exploration and production business and make provisions against customers defaulting on contracts, Taylor said. 

Vitol said last month its traded volumes of crude and oil products rose 13 percent from a year earlier to a record high of 303 million metric tons, equal to about 6.2 million barrels a day. Revenue, which rises and falls in parallel with commodity prices, plunged 38 percent to $168 billion as crude slumped.

Counterparty Risks

“Whilst opportunities in the physical market continue to exist, we are increasingly vigilant in respect of counterparty risk as current price levels will inevitably test some market participants,” Taylor said in a statement last month. “The absolute price levels and market volatility are causes for caution” as the risk of defaults increases, he said.

The company, which is formally incorporated in Rotterdam but has its main operations in Geneva, London, Singapore and Houston, has experienced strong growth over the last 20 years on the back of expanding oil trade, large price swings and, more recently, investment in storage and refining. In 1995, Vitol earned just $20 million.

Vitol’s 2015 results follow record profits from oil trading posted by Gunvor and Trafigura. Gunvor said last month net income soared more than fourfold in 2015 to $1.25 billion as the trading house sold the bulk of its Russian assets and earnings from oil trading increased.

Trafigura, which says it is now the world’s second-largest independent oil trader, said in December that gross profit for its oil trading division soared 50 percent to a record $1.7 billion in the 12 months through September.

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