Trafigura sees better H2 performance after recent pick-up in oil market volatility

London (Platts)--13 Jun 2018 841 am EDT/1241 GMT

Trafigura, one of the world's biggest oil traders, said the outlook for its second half had been improved by the recent increase in price volatility fueled by geopolitics and a tightening market, as it posted a 53% fall in first-half net profit Wednesday.

  • H1 net profit down 53%
  • Total oil trading volume rises 16%

"Restructuring of the oil trading positions and current increased volatility across commodity markets should have a positive impact" on the second half of the financial year, the company said.

Trafigura made a net profit of $221.8 million in the six months to March 31, its first half. That was down from $470.5 million a year earlier.

Total volumes traded in oil and petroleum products rose to an average 5.8 million b/d in its first half, up 16% year on year.

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A structural shift on the oil market had created more challenging trading conditions during its first half, it said, as a rebalancing of the market aided by the OPEC/non-OPEC output deal flipped structure to backwardation from contango.

That shift forced the company to undergo a substantial restructuring of its trading books, reducing costs by "shrinking inventories and radically adjusting our storage commitments", CFO Christophe Salmon said.

Backwardated markets typically generate lower trading profitability than those in a state of contango.

Energy trading houses like Gunvor, as well as Glencore and Vitol, have all seen their profits fall as a drop in price volatility along with the change in the market structure of oil made the trading environment more demanding.

Trafigura has recently strengthened its position as a leading exporter of crude, gasoline and distillates from the US and hopes to consolidate its position in China.

Its metals and minerals division saw trading volume increase 48%.

--Eklavya Gupte,
--Edited by Daniel Lalor,

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