Glencore, world’s biggest fuel trader, hits huge trading profit amidst volatile oil market

Top commodity trader and world’s biggest shipper of fuel, Glencore Plc, expects an impressive trading profit for the year, hitting the top end of its target, as the commodities giant joins other big oil companies who are making a huge fortune from the volatile oil market.

Bloomberg had reported that the oil and commodity trader has reported almost $1 billion in earnings before interest and taxes in oil trading in the first half of 2020, similar to what was earned for the full year 2019.

Income from oil trading has played a big role in sustaining the energy sector, which has been badly hit by the coronavirus pandemic this year. Anglo-Dutch giant, Royal Dutch Shell Plc, on Thursday, disclosed that the oil company recorded the best performance in its trading business for last quarter.

Also, the French oil rival, Total SE, said that it was able to exploit the extreme price volatility during April’s unprecedented supply glut. The 2 giants made small profits against expectations of losses with the help of trading units, which exploited the market prices when they were down.

The trading units of European oil and gas majors have shielded their second-quarter results from the full force of the coronavirus induced collapse of oil demand and prices, although according to the published results, huge write-downs by these firms showed the magnitude of the challenge ahead.

The Chief Executive Officer of Glencore, Ivan Glasenberg, on Friday said, ‘’Our marketing business has also risen to the challenge, delivering robust counter-cyclical earnings. A very strong first-half performance allows us to now raise our full-year 2020 EBIT expectations to the top end of our $2.2-$3.2 billion guidance range.’’

Glencore revealed that during oil prices crash in March and April, traders were able to buy and store huge volumes of cheap crude before selling them later for higher prices, a trade known in industry jargon as a contango play. Still, putting more money into these trades led to an increase in net debt.

The trading profit will be a relief for Glencore. Once again, the miner and trader have missed out on an iron rally that has provided bumper earnings for its biggest rivals, such as Rio Tinto Plc and Anglo American Plc. Glencore’s mining profits are driven by coal and copper, but it has no exposure to the steelmaking ingredient.

Glencore is the world’s biggest shipper of the fuel and has previously taken steps to defend the market. In 2015, during the oil price crash, the company made big cuts to its output, thereby helping the fuel rally as demand recovered.

Glencore’s shares rose 1.4% to 179.48 pence by 9.24 am in London. The stock has lost nearly a quarter of its value this year. Glencore helped the FTSE 100 bounce back on Friday following a US data-driven slump in the previous session.



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