Trader Vitol Said to Post 25% Profit Drop as Market Shifts

(Bloomberg) -- Vitol Group, the world’s biggest independent oil trader, suffered a 25 percent drop in annual profit as income from assets sales failed to offset weaker trading results.

Net income fell to $1.5 billion in 2017, from $2 billion the year before, according to a person familiar with Vitol’s results. The energy-trading environment has deteriorated as output curbs by OPEC and its allies upended the oil-price curve, making buy-and-store crude deals less profitable.

“It is pretty bloody tough,” Vitol Chairman Ian Taylor said in an interview last week. “And I don’t think anybody is making a lot of money.”

Oil traders are struggling to match earnings in 2015 and 2016, when an oversupplied market meant they could lock in profits by storing crude and selling futures contracts at higher prices. Vitol’s 2016 profit was its third highest in its 50-year history. The 2017 results were first reported by the Financial Times.

Closely held Vitol does not publish its financial results widely, filing with an almost 12-month delay at the Dutch Chamber of Commerce. A Vitol spokeswoman in London declined to comment on profits.

In a separate statement, Vitol reported a 0.6 percent drop in total 2017 oil trading volumes to 349 million tons from the year before, even as crude trading increased “modestly” to 178 million tons, or 3.6 million barrels a day. While gasoline dropped by 23 percent to 34 million tons, Taylor said the acquisition of Noble Americas should boost volumes for “years to come.” Total revenue rose 19 percent to $181 billion, Vitol said.

Liquefied petroleum gas trading volumes fell “slightly” to 14.3 million tons. Vitol enjoyed strong growth in liquefied natural gas -- super-chilled gas made liquid to transport by ship -- with volumes almost tripling to 7.4 million tons, from 2.6 million the previous year. That’s still less than Trafigura Group, which traded 8.1 million tons of LNG in its 2017 fiscal year, a 27 percent increase on the previous 12 months.

Challenging Year

It was a “challenging year” for Vitol’s core trading business, Taylor said in the statement. “Across the year, the pattern of demand and supply surprised the market.”

Vitol’s first-half profit jumped 50 percent to $818.9 million as the company sold oil pipelines and terminals, but third-quarter earnings fell by 50 percent to $189 million.

After more than two decades in the post, Taylor stepped aside as chief executive officer this month to be replaced by long-time board member and EMEA CEO, Russell Hardy.

Handling more than 7 million barrels of crude and petroleum products a day, closely held Vitol is formally incorporated in Rotterdam with major operations in Geneva, London, Singapore and Houston. It is owned by a group of 350 traders and executives who were paid $1.12 billion through share buybacks in 2016.

To contact the reporters on this story: Andy Hoffman in Geneva at ahoffman31@bloomberg.net, Javier Blas in London at jblas3@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Dylan Griffiths, Rakteem Katakey

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