Some of the 27 oil tankers anchored off shore during the outbreak of the coronavirus disease (COVID-19) are viewed from a U.S. Coast Guard helicopter near Long Beach, California, U.S., in a still image from video taken April 23, 2020. Image taken April 23, 2020. U.S. Coast Guard/Petty Officer Third Class Aidan Cooney/Handout via REUTERS
By Andy Hoffman (Bloomberg) —
Trafigura Group boosted its shipping fleet by 70% in April last year to profit from the wild price swings in the oil market caused by the pandemic, the company’s CEO said.
As government-ordered lockdowns destroyed about a quarter of normal oil demand, Trafigura secured as many oil tanker ships as it could to store the excess, Jeremy Weir, Trafigura’s chairman and chief executive officer said at the Future Investment Initiative conference in Saudi Arabia.
“We anticipated the demand destruction so we were able to ensure we were able to move the cargoes and buy the cargoes,” Weir said.
U.S. oil futures briefly plunged below zero in April as monthly contracts expired and holders desperately sought tanks to store the oil.
Trafigura didn’t foresee negative prices but “what we did expect to see was an issue around storage and an issue around supply chains,” said Weir.
At one stage last year, the market was so glutted that Trafigura was using everything from giant supertankers to tiny barges to hold barrels, Ben Luckock, the firm’s co-head of oil trading said at the time.
The unprecedented volatility proved a boon for traders such as Trafigura, who had access to ships and tanks to fill with crude. They were able to take advantage of a market structure known as contango that allowed them to sell forward futures contracts to lock in profits and deliver the oil later at higher prices.
Trafigura posted its best ever trading profits in its fiscal 2020 year, which runs to the end of September. It earned a record $5.3 billion in gross profit from oil trading, a threefold surge from the year before.
April, when oil prices went negative, was the busiest in the closely held company’s 27-year history even as most employees were working from home, Weir said.
“It really was an extraordinary time,” he said.
© 2021 Bloomberg L.P.
Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.
Join the 109,779 members that receive our newsletter.
Have a news tip? Let us know.
In a significant development for European energy markets, Russian energy giant Gazprom has completed its first liquefied natural gas (LNG) delivery to Italy from its Baltic Sea-based LNG Portovaya facility....
Israel launched strikes against ports and energy infrastructure in Houthi-held parts of Yemen on Thursday and threatened more attacks against the Iran-aligned militant group, which has launched hundreds of missiles at Israel over the past year.
President-elect Donald Trump has reignited the debate over the Jones Act, sharing a pro-Jones Act article that underscores the century-old law’s significance to America’s maritime industry and national security. The...
Maritime and offshore news trusted by our 109,779 members delivered daily straight to your inbox.
Essential news coupled with the finest maritime content sourced from across the globe.
Sign Up
Join The Club
