London (Platts)--28Feb2013/916 am EST/1416 GMT

Global trader Vitol said Thursday it expects oil demand growth this year to be limited by the continued economic weakness in certain countries in Europe, and blamed a drop in trading volumes last year on a lack of volatility in the energy markets.

In 2012, Vitol's total traded volumes for crude oil and oil products fell by 4.4% to 261 million mt, it said in a statement.

This compared with 273 million mt in 2011 and 264 million mt in 2010, on a like-for-like basis.

Vitol also has a trading position in natural gas, electricity, coal, chemicals and carbon credits, and total revenues for 2012 for global trading activity were $303 billion, compared with $297 billion in 2011, it said.

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On a contracted sales basis, natural gas sales were 1,430 TWh, power sales were 178 TWh, coal sales 25.2 million mt and carbon sales 113.5 million mt, Vitol said without giving year-on-year comparisons.

"[2012] was a year without the additional advantages of market structure or volatility that previous years have offered and trading markets continue to become increasingly competitive, with additional pressure on margins," Vitol CEO Ian Taylor said.

Vitol said global oil demand growth is currently forecast at around 1 million b/d this year, only a little higher than in both 2011 and 2012, with some two-thirds of the growth expected to be in the fast-growing economies of Asia and the Arabian Peninsula.

"Oil demand growth in 2013 is expected to remain somewhat constrained by the continued economic struggles of many of the weaker European economies," the company said.

It said non-OPEC supply is expected to grow by around 1.5 million b/d this year.

"This forecast is dominated by our expectation that production will grow in the US by almost 1 million b/d and in Canada by around 350,000 b/d," Vitol said.

It added that, following recent lower OPEC production, price stability has been achieved and the market currently looks "well balanced."

REFINING, SHIPPING

In refining, Vitol said the market performed better than expected in 2012 as a result of unexpected refinery closures.

But, it said, "the new capacity planned to come on line later in 2013 is expected to exceed the growth in demand we are forecasting, so we expect refinery margins to be somewhat lower later this year after an unexpectedly strong first quarter."

It also said the shipping market was likely to "continue to be severely challenged, particularly in the dirty sector as long-haul crude movement is expected to fall but the supply of vessels will still increase."

"On the clean side of the market the outlook is a little brighter as we expect to see greater products exports out of both the Middle East and the US Gulf Coast which may contain the impact of the increase in supply somewhat."

Vitol said it chartered for 5,495 voyages in 2012 and traded 117 million mt of crude oil on a delivered basis.

Vitol said that, while physical energy trading is at the heart of its business, it is expanding its global reach.

"We continue to look at a variety of new investment opportunities in the midstream and downstream energy sectors, which can deliver growth and synergy with our core trading business," it added.

Its refining portfolio was boosted by the acquisition of the 68,000 b/d Cressier refinery in Switzerland in June 2012, while in Germany, it recently entered the marine bunker fuel market at the ports of Hamburg, Bremerhaven and Weser.

It said its jet fuel arm, Vitol Aviation, added new airport locations including Kuala Lumpur and 21 locations in Africa last year, and 2013 new market plans include airports in Paris, Moscow and Geneva.

UPSTREAM

In its upstream businesses, Vitol said it continues to focus on opportunities in the Offshore Cape Three Points (OCTP) block in Ghana, where it is partnered by Italy's Eni.

"The current focus is on the commercialization of the gas resources," Vitol said.

In August last year, Eni and Vitol said they would develop the gas finds offshore Ghana for the domestic market.

They signed, together with GNPC, a memorandum of understanding setting out the key principles for the future development and commercialization of gas discoveries in the block.

Eni has discovered some 2 Tcf of gas in the block and in 2011 said it was looking into the possibility of an LNG export project.

But the idea of an LNG project found little support from the Ghanaian government.

Eni owns a controlling 47.2% share in the block, while Vitol holds 38% and state company GNPC 15%.

Vitol also earlier this month said it was looking at making a $192 million takeover offer for Canadian explorer Sterling Resources.

For Vitol, the deal would represent another step in its strategy to expand its upstream portfolio, building on assets it already has in the former Soviet Union and West Africa.

--Stuart Elliott, stuart_elliott@platts.com
--Edited by James Leech, james_leech@platts.com

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