The premium extended through independent dealers such as Vitol Group and Trafigura Group Ltd. to the own units of the oil giants Royal Dutch Shell Plc, Total SA and BP Plc, which made profits in the billions.
“2019 was definitely one of the best years for the energy trading industry,” said Marco Dunand, managing director of Mercuria Energy Group Ltd., one of the five largest independent oil traders.
For the independents, the busy year guarantees a fat bonus season for a group of companies that are largely owned by their managers and executives. For European oil companies, the trade boom will help Shell, BP and Total have had a difficult year in other areas of their business.
In interviews with experienced traders and top managers, it was agreed that the industry benefited from a happy mix of factors in the oil market. The recent investments in trading in natural gas, electricity and liquefied natural gas have also borne fruit.
First, a series of delivery delays increased the premiums that oil refineries pay for some raw materials above the reference price. Washington imposed sanctions on Venezuela in early 2019 and disrupted the flow. Then Russian deliveries to Europe via the important Druzhba pipeline were stopped after the oil was contaminated with a corrosive pollutant. And in September, Saudi exports were hampered after a terrorist attack on the country’s main oil factory.
Some dealers also benefited from the so-called IMO2020 rules, which force the world’s merchant shipping fleet to use fuel with a lower sulfur content. The regulations have caused a stir in the oil refining and shipping industries and pushed up the price of heating oil and marine diesel.
The results offer scope for a sector affected by falling margins. Brent crude, the world’s leading benchmark, was trading in a relatively narrow range of $ 52.51 to $ 75.60 a barrel throughout the year.
Vitol, Glencore, Shell, BP and Total declined to comment on their results.
The trend was already evident in the results from Trafigura, which report earlier than others due to a fiscal year ending in September. Trafigura announced that its oil division had record gross earnings of $ 1.7 billion last year.
Executives from other countries are also expecting an outstanding year, even if they indicate that they have not yet reviewed their annual financial statements or have made the final write-downs on the 2019 results. Glencore Plc’s oil trading division. For example, people familiar with the matter achieved the best results ever. One person said Glencore expected earnings before interest and taxes of more than $ 1 billion in oil trading.
Photo source: picture from an open source