Trafigura’s full-year oil, gas trading earnings jump as volumes grow 6%
Trafigura, the world’s second-biggest independent oil trader, reported sharply higher full-year oil and gas trading results Wednesday on increased volumes and a more favorable trading environment.
The Singapore-based oil and metals trading house said its traded volumes of oil and petroleum products rose to 292 million mt in its 2018/19 financial year — the 12 months to end-September — or some 6 million boe/d, up from 275.2 million mt in 2017/18.
Trafigura said its divisional gross profit from oil and gas trading jumped 64% to $1.68 billion.
“This was a favorable trading environment for the crude team, which had an excellent year expanding both volumes and profits,” the company said in its annual report, adding that “physical margins improved markedly over 2019”.
Trafigura said it extended its lead as the largest exporter of US crude, helped by flows from August through the Plains All American Cactus II pipeline linking the shale fields of the Permian Basin to the US Gulf Coast.
“It means we can take full advantage of profitable arbitrage opportunities into Europe and Asia and build deeper client relationships with Asian refiners,” the company said.
LNG spot trade volumes grew 27% to 12.6 million mt of oil equivalent following the start of shipments a 15-year offtake agreement with the US’s Cheniere and other mid-term contracts this year. Traded gas volumes also jumped, by 147% to 17.1 million mtoe, after expanding in Italy, Spain and the UK.
Trafigura said its trading earnings benefited from geopolitical tensions and trade conflict which created volatility in prices and flows, supporting its core business of physical arbitrage based on price differences in time and location.
Looking ahead, Trafigura said it saw “favorable trends” set to continue into 2020, adding it was optimistic about its performance in 2020.
“We expect US volumes to continue to grow, demand for US light sweet crude to gain extra momentum from IMO 2020, and margins to continue to build,” the company said.
After merging its trading in bunker, fuel oil and gasoil business last year ahead of IMO 2020 marine fuel sulfur changes, Trafigura saw higher earnings but lower volumes from the sector this year and said it planned to continue to focus on the bunker fuel market in 2020.
In the LNG market, Trafigura said it expected the pattern of growing LNG production, increasing demand and greater market liquidity and transparency to offer more opportunities for our integrated LNG/natural gas operation in the US, Europe, Asia and Latin America.
Speaking in early October, Trafigura CEO Jeremy Weir said he expected global oil prices will likely hold close to current levels well into next year, with Brent averaging in the $50-$60/b range, unless US-China trade tensions are resolved and fears over a new global recession subside.