Ian Taylor, chief executive officer of Vitol, an independent oil trader, has said profitable trading opportunities caused by the oil collapse have been sharply diminished in 2015, with crude prices now seem to have bottomed.
“Yes we have seen a bottom,” said Mr Taylor, speaking ahead of his appearance at the FT Commodities Global Summit in Lausanne, Switzerland, on Tuesday.
Mr Taylor considers that the slower-than-expected return of Iran’s oil exports and growing demand meant the price crash was probably over, the Financial Times has reported.
Rival Gunvor Group’s chief executive Torbjörn Törnqvist has echoed this sentiment.
The dramatic plunge has allowed commodity traders like Vitol, Trafigura and Glencore — as well as energy majors such as Shell and BP — to buy oil cheaply for storage.
Traders lock in a profit by means of the simultaneous sale of futures contracts at higher prices for later delivery, with the market in a structure known as contango. However, the price difference between contracts in the spot market and for later delivery has recently narrowed, which made it harder to store barrels profitably, especially on tankers at sea.
“The major moves we saw at the start of the year have been mitigated,” Mr Taylor said, describing the trading climate as “a bit flat”.
“We’d all love a super-contango”, but comparisons to the
profitability seen in 2008-09 after the financial crisis when prices
dropped are “way overblown”.
While Vitol registered a net profit after tax of $1.35bn at the end of 2014 - the most for the privately owned company since 2011, a huge part of those profits were made in the fourth quarter when crude oil prices sank and volatility increased.
Mr Taylor’s comments contrast with upbeat comments from rival
Trafigura this week, whose chief executive said on Monday the recent oil
price moves have “been an opportunity for growth”, with strong returns
from oil trading.
In 2015 oil consumption is expected to grow 1m barrels a day as a result of lower prices and a growing global economy.
As Mr Taylor supposes, a reached deal between Iran and world economies would mean increased volumes going into the market in the last quarter of this year at the earliest, with the “beginning of next year” more likely.
