Commodity trading giant Vitol bought back shares worth $2.2 billion from its top 350 executives and employees who are the owners of the company, Bloomberg reported, noting this brings the total paid out over the last 15 years to $14 billion.
The record payout highlights the resilience of the trading industry even when the commodities it trades in go through the bust phase of the industry’s cycle. Even this resilience, however, has limits. Vitol reported a 70-percent drop in profits for the first quarter of the year because of the coronavirus pandemic and the resulting collapse in oil demand.
The commodity trader had expected a strong year for oil demand and had entered 2020 with a sizeable inventory, the Financial Times reported in June. However, as the pandemic spread across the world and countries went on lockdown, these expectations went out of the window.
In March this year, Vitol’s chief executive Russell Hardy told Bloomberg in an interview that he expected oil demand to slump by between 15 and 20 million barrels over several weeks.
“It’s pretty huge in terms of anything we’ve had to deal with before,” Hardy said.
Vitol called the end of the worst period for the oil market in early May, with Hardy telling Reuters that “It’s a bit easier to see the future, so the market is more able to make an educated guess about what that supply/demand balance looks like. We haven’t had a monster rally. It’s just a statement that the worst is over.”
Indeed, the commodity trading major expects to turn in a “reasonable result” this financial year despite the 70-percent profit drop for the first quarter. Prices have stabilized at $43 a barrel for Brent crude and $40 a barrel for West Texas Intermediate, but demand recovery remains a bumpy ride.
By Charles Kennedy for Oilprice.com
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