In the closely knit energy industry, they are virtually unknown. On the streets of Geneva, London and Houston, they go unrecognized. But Bloomberg reports a handful of executives were oil-industry standouts in 2015. They thrived because of—not despite—plunging crude prices.
From Total SA to Trafigura Group, trading emerged as the industry’s cash cow.
Take Vitol Group BV, the world’s largest independent energy-trading operation. The 50-year-old company reported net profit of $1.6 billion last year, the fourth highest ever, buoyed in part by the strategies employed by the teams headed by Mark Couling, chief oil trader.
“The oil trading industry as a whole enjoyed the best year since 2008-09,” says Damian Stewart, managing director at Human Capital, a commodities-focused headhunter.
Oil traders were rewarded by a surge in volatility. They also capitalized by holding onto crude to take advantage of the market contango—a situation where future prices are higher than current prices—allowing them to buy oil cheap, store it in tanks to sell later and locking in a profit via derivatives.
Vitol hired one of the world’s largest tankers, the Overseas Laura Lynn, a 380-meter-long vessel (about equal to the Empire State Building laid on its side) capable of carrying 3 million barrels of oil, to store crude offshore of Dubai. Competitors including Glencore Plc prospered by hiring capacity on land from St. Lucia in the Caribbean to Saldanha Bay in South Africa.
At Glencore Plc, the world’s largest commodities trader, its mining business suffered, but Alex Beard, head of oil, saw its energy trading earnings before interest and tax rising to $778 million last year—up 49% from 2014. The company profited from “high market volatility, entrenched contango, a decent refinery margin environment and promising returns on tanker freight,” Glencore says.
“A combination of low prices and contango is great for traders,” says Olivier Jakob, managing director of Petromatrix AG, an oil consultant based in Zug, Switzerland. “It is a profitable environment.”
