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Vitol eyes a decade of oil growth but warns on jet fuel recovery

Highlights

Oil trading volumes fell by 11% in 2020 to 7.1 million b/d

Gas, LNG, LPG key 'transitional' energy markets

Some traders see oil trading earnings hit record in 2020

London — Global oil demand will continue growing for another decade but near-term consumption of jet fuel to pre-2019 levels will take "some time", Vitol, the world's biggest independent oil trader, said April 6.

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After its traded oil volumes took a hit from the pandemic last year, Vitol said it expects a recovery in most sectors in the second half of this year, despite the outlook for jet fuel remaining uncertain. Longer-term, the trading house expects a shift in energy demand, with demand for "transitional" fuels such as LNG, natural gas and LPG growing while low-carbon power capacity builds.

"We see business opportunities in particular sectors, such as bunkering in growth markets, including Asia and the Middle East, and are expanding our offering to capture these," Vitol said.

In 2020, Vitol said its volumes of traded crude and oil products slid by 11% due to the collapse in global demand during the COVID-19 pandemic. Average volumes of crude and products traded fell to 7.1 million b/d in the year, down from 8 million b/d in 2019, after lockdowns saw global oil demand dive by 8.8 million b/d in 2020.

"Demand across the barrel was mixed and reflected the performance of the wider economy: light ends used in manufacturing outperformed, our naphtha volumes increased 18% year-on-year, but transportation fuel volumes fell,"

Speaking in late September, Vitol CEO Russell Hardy said he expected oil demand to recover to around 106 million-109 million b/d within the next decade.

Platts Analytics forecast 2021 global oil demand growth to rebound by 5.9 million b/d this year, compared to the contraction of around 9 million b/d in 2020, with the backend loaded in the second half of 2021 as vaccination efforts gain pace. Platts Analytics expects global oil consumption to continue rising before reaching a plateau of around 113.5 million b/d in the late 2030s under a "most likely case" scenario.

With air travel demand expected to be structurally damaged due to behavioral changes as a result of the pandemic, Platts Analytics does not expect global jet and kerosene demand to return to 2019 levels of 8.1 million b/d before 2026.

Bumper profits

During 2020, Vitol said its traded jet fuel volumes were the most affected by the pandemic, dropping 39% year-on-year to 11.3 million mt.

Traded volumes of gasoline and gasoil were down by 6.1% and 1.4% respectively, it said, with the impact of lockdowns tempered by the increasing use of personal vehicles versus public transport and a growth in home deliveries.

The privately-held trader did not release earnings details for 2020 but said its total turnover was $140 billion, down from $225 billion in 2019.

Global commodity traders are widely expected to have banked one of their strongest years ever in terms of profitability in 2020, however, after benefiting from the unprecedented volatility and market dislocations due to the pandemic.

Glencore and Trafigura both saw profits from oil trading hit record highs for the first half of 2020 after the pandemic fueled a surge in trading opportunities.

Vitol supplies over 3.5 million b/d of crude and feedstocks to the global refining industry and estimates that 250 ships are transporting its cargoes of oil, fuel, LNG and coal at sea at any one time.

Vitol also has stakes in six oil refineries with a total refining capacity of 480,000 b/d and in thousands of fuel pumps globally through direct ownership, or joint ventures.