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Vitol made record profits during 2020 oil swings

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Vitol made record profits in 2020 as the gyrations in global energy markets triggered a windfall for the world’s largest independent oil trader.

Despite being blindsided by crude’s sharp fall at the beginning of the pandemic, the group earned a gross profit of $5bn in 2020 and net income of almost $3bn, according to figures shared with the Financial Times by people in the industry who have seen the privately held company’s accounts.

That was up from $2.2bn of net income in 2019, which had been a near-record year for the group.

The figures are the latest evidence that traders were the big winners from last year’s oil slump, when crude prices collapsed as the pandemic created demand-sapping lockdowns around the world 12 months ago.

Vitol, which declined to comment on its results, separately on Tuesday said it traded an average of 7.1m barrels a day of crude and refined products last year, down from 8m b/d in 2019.

The group’s turnover, which is heavily influenced by the price of oil, was $140bn in 2020 compared with $225bn in 2019.

Commodity trading houses stood to profit after the price of Brent crude fell to less than $20 a barrel last April, as it presented an opportunity for those with access to storage, both on land or at sea through idled tankers, to buy up cheap barrels and hold them until prices recovered.

Vitol had initially struggled in the early stages of the pandemic, after a large position betting on a recovery in oil prices soured. Vitol’s net income plunged 70 per cent in the first quarter to $180m, the Financial Times reported last year — a sharp decline from the $600m the company made in the same period in 2019.

But the latest figures suggest that from around the second quarter of 2020 the company’s trading results soared.

Vitol’s rivals such as Trafigura and the oil trading arms of supermajors BP and Royal Dutch Shell also had strong results in 2020. In the year to September, Trafigura posted net profit of $1.6bn, up from $867.8m in 2019.

In a statement accompanying its turnover and trading volume figures, chief executive Russell Hardy nodded to the price moves and dislocations in the market that would boost their earnings for the year.

“The extraordinary market conditions in the initial stages of lockdown and sudden drop in demand resulted in huge logistical challenges and market opportunities,” Hardy said.

“With stocks building by over one billion barrels in the early part of the year, the industry had to manage unprecedented circumstances, restructuring supply chains to handle the crude oil and products that neither producers nor consumers could contain.”

Hardy added that while demand was recovering, having slumped by almost 9 per cent globally last year, “the recovery has been slower than many anticipated and near-term uncertainties remain”.

The company said it was taking steps to reorientate its business given long-term concerns about growth in oil demand.

It said it has committed more than $1bn to “identified renewable projects”, though it indicated oil trading will remain a major part of its business for years to come, even as it grows gas and power trading.

“The energy transition requires our business to change,” Hardy said.

“We continue to believe that demand for oil will not peak for another decade, but nonetheless we must position our business for a lower emissions world . . . we will steadily build our transitional and new energy offering and portfolio, serving our clients as their needs evolve.”

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