Global commodity trader Vitol said Tuesday its activity in the energy markets declined last year along with demand as the Covid-19 pandemic raged on.
The world’s top oil trader, and a dominant force in the still-developing liquefied natural gas (LNG) markets, saw both oil and LNG trading fall.
“The extraordinary market conditions in the initial stages of lockdown and sudden drop in demand resulted in huge logistical challenges and market opportunities,” said CEO Russell Hardy of crude activity, which was one of the hardest hit sectors of the global economy last year.
He said the firm anticipates a longer-term shift in energy demand away from liquid hydrocarbons toward power. However, in the medium-term, demand for hydrocarbons such as LNG, natural gas and propane “will grow as economies move away from coal and other solid fuels.”
Vitol entered the LNG market in 2006 and its operations have grown since to become a major influence on global trade with other leading trading houses including Gunvor Group Ltd., Glencore plc and Trafigura Group Pte. Ltd.
Vitol’s LNG trading volumes increased 35% year/year in 2019 to 10.5 million metric tons (mmt), but fell to 10 mmt last year.
The company continues to invest in natural gas as it views the fuel as key in plugging the gap to backup the intermittent generation of renewable energy sources until large-scale battery capacity has grown significantly, Hardy said.
The company recently acquired four combined-cycle natural gas plants in the UK and began offering “green” LNG cargoes earlier this year for customers that want to offset pollutants with emissions reduction credits.
Vitol is also investing in renewable resources such as wind, solar and renewable natural gas projects, with more than $1 billion of new capital committed to date. The company’s largest renewable presence is in the United States, but it has a growing portfolio of similar assets in Europe and Asia.
However, oil remains the largest product. Traded volumes fell to 7.1 million b/d last year, compared with 8 million b/d in 2019.
“Our inventories grew markedly as we absorbed customer cargoes when demand collapsed and the market moved into a steep contango,” Hardy said of the crude market early last year. He added that oil demand was mixed and reflected needs across the broader global economy as the world grappled with the pandemic. Manufacturing demand was light, petrochemical demand was up and transportation fuel volumes fell the most, with traded jet fuel volumes decreasing by 39% year/year.
“Whilst much demand has returned and the outlook is positive, the recovery has been slower than many anticipated and near-term uncertainties remain,” Hardy said.
Hardy added that while Vitol expects a recovery across most sectors in the second half of this year, aviation demand is likely to remain below 2019 levels for some time.
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