Posted by SuperDriveGuy on December 23, 2009 at 4:04pm
Swiss oil traders prosper from 2009 volatilityby Giles BroomDecember 21, 2009 | 12:00taken from swisster.chTraders say the 2009 oil market has been profitable, helped by market volatility and beneficial price differentials between spot and futures markets. Top executives tell their success stories to the media and predict that next year will be more competitive now the ‘big five’ traders have expanded in the same markets.According to the Financial Times the five largest traders – Vitol, Glencore, Trafigura, Gunvor and Mercuria, all of which have a big presence in Switzerland – are likely to take home profits of between 3.5 billion and 4 billion dollars in total, making 2009 their best year.“We had a very good year,” said Mercuria chairman Marco Dunand, in the FT report. Pierre Lorinet, chief financial officer at Trafigura, said: “business has been good.”The powerful Swiss-based traders continue to grow. Mercuria announced revenues this year of 47 billion US dollars, compared with just over 6 billion from 2004, its first year of trading.Revenue is “a slightly meaningless number” in the energy trading sector, said Mark Ware, global head of corporate affairs of another Geneva-based giant, Vitol. Ware said his company would announce more detailed 2009 financial figures in January which will explain how well Vitol has done.These influential top five oil traders account for 15 per cent per cent of the world’s crude and oil products output, equal to the combined oil production of Iran, Iraq, Kuwait, United Arab Emirates and Venezuela.Glencore, a private company headquartered in Baar, says on its website that it alone handles 3 per cent of global crude and petroleum products.It has been an exciting twelve months in the Geneva trading scene for other reasons. Two large traders were snapped up by larger energy companies: Dutch company Essent was bought by Germany’s RWE and Addax Petroleum sold up to China’s Sinopec.But on the whole energy traders still try to avoid headlines. A spokesperson for Gunvor told Swisster that the company “has a policy of not commenting on its performance or the market in general” and it refused to give an interview to the Financial Times.The characteristic privacy of Swiss energy traders has led journalists and politicians to cast them as market manipulators and sanctions busters.Trafigura’s reputation was also tainted by a 2006 incident in which a company working with the trader was accused of dumping toxic waste in West Africa.The firm paid a settlement of 198 million dollars in an out-of-court claim related to the incident and this year used an English court injunction to prevent a newspaper from publishing information about the case.On Friday, Trafigura published an apology from the BBC regarding allegations made against the company in a documentary.The unpredictable 2009 price movements have caused problems for producers and consumers of oil, but for the top players, volatility can mean a market of opportunity.Savvy traders have benefited from the increase in crude prices this year, buying at lower points in the market, then selling once the price has increased. The crude price rose from 32 US dollars in January to more than 80 in October.Energy executives told the FT that this year’s ‘contango’ market – a state in which the current energy price is cheaper than barrels held on the futures market – is set to continue in 2010, even more so in diesel than in crude oil.This means that buying at ‘spot’ prices – the market of the moment – and selling higher-priced futures contracts will continue to be profitable.Some traders are able to put oil in storage while the price increases, then sell on the higher futures market to ensure a profit. In December the European Commission gave approval for Vitol to complete the purchase of storage facilities in the Netherlands currently owned by refiner Petroplus.In November Vitol also bought a 15 million barrel storage facility in Oklahoma, USA.Ton Schurink of CFT Advisory Services told Swisster that “most companies made a lot of money in the first half of 2009 with the contango game, a bit less in the second half.”But not everyone is in a position to play. “We haven’t profited from contango,” said trader Marc Ducobu of Morges-based Arcadia, as his company does not own any storage facilities.Traders such as Mercuria and Litasco are better-placed to profit as they have assets which can store the black gold while it increases in value, according to Ducobu.The ex-Cargill trader has a gloomy outlook for 2010, predicting that “the economy will stay bad” and “the fundamentals are negative.”And with the five largest traders all expanding, there may be a point in 2010 when the room becomes too crowded for each player to enjoy the party. Executives expect a closer fight for market share next year.
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