Probes and squeezed profits change the oil trading game

GENEVA/LONDON (Reuters) – For the world’s biggest oil traders, it feels like a return to the 1980s when earnings were diluted by an abundance of crude. After three decades of stellar expansion and booming revenues, profit margins at Vitol, Glencore, Trafigura, Gunvor, Mercuria and other merchants have been squeezed by a market again awash with crude and amid stiff competition from national oil firms. A raft of high-profile U.S. probes into trading activities are also shaking up the business, echoing the transformation that followed the 1983 U.S. indictment of Marc Rich, the godfather of global oil trading. (Graphic: Oil trading profits link: Veteran executives, many of whom learned the trade in the Marc Rich era, say only the fittest firms will survive the new crisis. “I’ve been hearing arguments about the death of trading for the past 30 years. But the reality is: there are those who adapt and those who disappear,” Gunvor CEO Torbjorn Tornqvist said. He said companies have always had to change with the market, such as adapting to the development of futures. But last year was particularly tough. Vitol, Mercuria, Gunvor, Trafigura and the oil trading division of Glencore made a combined net profit of about… continue reading

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