One of the world’s biggest commodity traders, privately held Trafigura, delivered record core earnings in what became its strongest trading year ever due to the extreme oil market swings earlier this year.
In its annual report for 2020, covering the financial year ended on September 30, Trafigura booked exceptionally strong financial results, mostly thanks to its core oil and petroleum trading business. The commodity trader’s net profit was the highest since 2013, while the gross profit and earnings before interest, tax, depreciation, and amortization (EBITDA) were the highest on record.
The biggest commodity traders typically profit from a glut in oil markets as they store oil to sell at higher prices in the future. In the second quarter this year, the oversupply on the market reached record highs as global oil demand crashed in the pandemic and Saudi Arabia and Russia briefly fought a price war for market share, which also contributed to the glut and to the oil price collapse. In March and April, traders rushed to charter supertankers for floating storage for several months to a year so they could sell the oil at higher prices later.
“Extremely volatile conditions and market distortion throughout much of FY2020 created increased demand for the services of a large physical trading house like Trafigura in helping to manage the disruptions resulting from imbalances in supply and demand. Accordingly, our Oil and Petroleum Products Trading division had a very strong year,” Trafigura said.
In the financial year October 2019 through September 2020, Trafigura saw its net profit jump to US$1.6 billion, up from US$900 million in FY 2019, while gross profit more than doubled to US$6.8 billion and EBITDA tripled to US$6 billion.
“Our financial result, including a net profit for the year of USD1,599 million, reflects an excellent performance from our core trading divisions, Oil and Petroleum Products, and Metals and Minerals, both of which delivered record gross profit and EBITDA,” Jeremy Weir, Trafigura’s Executive Chairman and CEO said in a statement.
Looking ahead, the commodity trader expects “volatility and market distortion to continue, while demand will be slow to recover from the effects of COVID-19.”