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Page added on October 9, 2017

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World’s Largest Oil Trader Says Peak Demand Is Coming

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Vitol is responsible for the trade of around 7 percent of global oil, which makes it the biggest oil trading firm in the world. Taylor admitted he is concerned about the company’s place in a new, less oil-dependent, world. An additional cause for worry is the shrinking pool of talent, as more young people opt for a career in technology, he said.

A third cause for worry for one of the world’s top oil traders is the low price of the commodity, although Taylor said that he expected prices to improve to about US$60-65 in the next two to three years. Before that, however, Taylor said, growing U.S. oil exports would continue to pressure international benchmarks in 2018.

The Vitol chief said the international oil price benchmark, Brent, could do with a liquidity boost and he praised plans to add in 2018 a fifth North Sea grade from Norway’s Troll field to the four-grade BFOE basket that makes up the benchmark.

However, Taylor noted, more grades need to join Brent, Forties, Oseberg, Ekofisk, and Troll in order to further improve liquidity. Yet, he said, adding Russia’s Urals blend would not help liquidity because it is loaded from several terminals and the loading programs are inconsistent.

One of the biggest traders of Kurdish oil, Vitol could suffer adverse consequences should Kurdistan attain independence. Indeed, Taylor said he hoped the autonomous region would not split from Iraq – a prospect that is currently distant, as Baghdad takes aggressive measures to cut off Kurdistan’s links to the bigger world after the autonomous region voted for independence in its recent referendum.

The United States Oil Fund LP ETF (USO) closed at $9.97 on Friday, down $-0.28 (-2.73%). Year-to-date, USO has declined -14.93%, versus a 14.85% rise in the benchmark S&P 500 index during the same period.

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5 Comments on "World’s Largest Oil Trader Says Peak Demand Is Coming"

  1. Mick on Mon, 9th Oct 2017 7:04 am 

    You don’t need to go to Norway to see its troll fields . There’s plenty of them around here . Anyway Just another suckers pimp rag pushing shite investment

  2. rockman on Mon, 9th Oct 2017 9:44 am 

    Vitol does more then “trade” oil, a rather loose term itself:

    “Since our formation in 1966 we have owned, operated or had interests in refineries and are currently invested in six refineries worldwide with a total refining capability of 480,000 barrels a day.”

    It is actually involved in ever step from the well head to the finished product. Many don’t understand that the refineries buy very little oil directly from producers. With the possible exception of Mobil Oil while working there for a couple of years the Rockman has never worked with a producer that sold its production to a refinery.

    The huge leverage Vitol is blending. Each refinery has very specific demands for the blended oil it requires. Usually because different refineries have varying output goals. Some will be focused on motor fuels while others are targeting other products. By controlling a large portion of the BASE OIL market Vitol can optimize its profit margins.

    Vitol’s concern about demand is based on the fact that its revenue, like refineries and retailers, is very volume dependent. It might be making a very good profit margin years down the road but at the same time bringing in much less total revenue.

    Vitol, like all the “oil traders”, are little known by the public despite being the primary determining factor on the price consumers pay for their petroleum consumption.

    IOW it ain’t ExxonMobil. LOL.

  3. Anonymous on Mon, 9th Oct 2017 11:38 am 

    I think of them mostly as a trading and ocean shipping company. BP has a similar unit that does a lot of deals having nothing to do with BP up/down stream needs. They are middlemen.

  4. rockman on Tue, 10th Oct 2017 9:52 am 

    A – “BP has a similar unit that does a lot of deals having nothing to do with BP up/down stream needs.”. So true. I’ve witnessed a number of instances when a company’s trading division gave an advantage to a competitors upstream operation over their upstream group. As I’ve said before: it ain’t personal…just good business.

  5. Outcast_Searcher on Tue, 10th Oct 2017 12:17 pm 

    rockman: Right, and why not.

    There is no reason a conglomerate can’t (or shouldn’t) operate a number of separate divisions that can make money in a variety of economic situations.

    As long as over time, each major division makes a decent profit given the risk, fretting about such details is counter-productive.

    In fact, the overall business is stronger when there is more range and flexibility of scenarios to operate profitably under.

    This is why many companies dealing in commodities use hedging (futures) — whether on the buy or sell side. Tremendously reducing risk is worth giving up even a significant amount of potential profit.

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