Wednesday, 26 October 2011 00:00

Trading Houses, the True Business

Politics are swamped with Greek unpayable debt and Hippies occupying financial parks downtown of major metropoles. All this time, people all over the planet burn gas and oil to generate heat and light, to travel or to produce industrial goods. Trading raw materials is a business beyond Apple or Intel, and sometimes even beyond crude oil exporters such as Saudi Arabia and Venezuela.

Two of the biggest trading houses, "Vitol and Trafigura, sold a combined 8.1 million barrels a day of oil last year. That's equal to the combined oil exports of Saudi Arabia and Venezuela."

"Vitol's sales of $195 billion in 2010 were twice those at Apple Inc. As well as the 200 tankers it has at sea, Vitol owns storage tanks on five continents.

In recent months, for instance, Vitol's crude oil trading business served partners like the Libyan rebels (supplying them with $1 billion in fuel), the US government, the Syrian regime, at the same time. This tells us that trading and investing in oil is transparent to political colors.

Loopholes in international sanctions, or state regulations limiting proprietary trading for banks, are rules not applying for the trading houses.

"Trading houses have huge volumes of proprietary trading. In some cases it makes up 60-80 percent of what they do," said Carl Holland, a former price risk manager at oil major Chevron Texaco, who now runs energy consultancy Trading Solutions LLC in Connecticut. "They have the most talent, the deepest pockets, and the best risk management."

WHO: Vitol, founded 1966 in Rotterdam by Henk Vietor and Jacques Detiger WHERE: Geneva and Rotterdam WHAT: Oil, gas, power, coal, industrial metals, sugar TURNOVER: $195 billion (2010) CEO: Ian Taylor STAFF: 2,700


The strategic and operational advantages that apply to the Vitol Group as a whole – speed, flexibility, local understanding

"Vitol has been building its upstream oil and gas business for almost 20 years. Today, we have a diversified portfolio of exploration, appraisal, development and production assets in the Former Soviet Union (FSU), Southeast Asia and West Africa.

Our net production is currently in excess of 8,000 barrels of oil per day and our proved plus probable (2P) reserves are around 100 million barrels of oil equivalent. Although we already hold a large portfolio of discovered but undeveloped oil and gas resources and a material exploration inventory, we are continuously seeking other growth opportunities."

Oil, Gas and Consumable Fuels Vitol GPC Investments S.A.

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