Vitol cautious on shift to renewable energy as peak oil demand looms

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Vitol, the world’s largest independent oil trader, said Tuesday it was looking to place further bets on low-carbon, renewable energy, while still expecting global oil demand to continue to grow until the mid-2030s.
Reporting its 2018 revenue and trading volumes, the privately-held trader said it was considering how its “skill sets can best be deployed” in developing and trading alternative sources of energy to fossil fuels.
“However, at present, we do not see how this can be achieved across all sectors in the near to mid-term, without halting economic development in large parts of the world,” CEO Russell Hardy said in a statement.
“We anticipate that oil demand will continue to grow for the next 15 years, even with a marked increase in the sales of electric vehicles, but that demand growth will begin to be impacted thereafter.”
Vitol’s call on the timing of peak oil demand was in line with that of oil major BP, which last month said it expected global oil demand to “plateau” by 2035.
BP sees more of the world’s energy needs being met by renewable fuels in coming years, a shift exacerbated by curbs on some plastics and the rise of electric vehicles in the transport sector.
Like many of its oil industry peers, however, BP predicts that oil will continue to play a vital part of the global energy mix well beyond 2040.
Pressure on big oil producers to diversify away from fossil fuels has been rising sharply, with most oil majors pledging billions of dollars of spending on power networks, renewable energy projects and charging technology for electric cars.
Vitol is in a venture with Low Carbon’s VLC Energy which last year completed construction of the UK?s largest battery-park portfolio.
The oil trader also plans to invest in renewable energy assets across Europe with Low Carbon, with a focus on large-scale wind generation.
Vitol also owns VPI Immingham, one of the largest combined heat and power (CHP) plants in Europe, on the river Humber, UK.
During 2018, Vitol said its crude and product trading volumes rose 2.3% to an average 7.4 million b/d.
Crude trading continued to represent the largest part of its business, with volumes rising to 3.8 million b/d, up from 3.5 million b/d in 2017 and an increase of 1.5 million b/d over the past five years.
Vitol said its product volumes were mixed last year, with a 30% increase in gasoline volumes to 44 million mt, largely offset by some decline in fuel oil and naphtha volumes.
Without giving comparative figures, Vitol said traded volumes in its LNG business grew to 7.8 million mt in 2018 while total turnover came in at $231 billion.
Independent energy traders have been struggling to maintain their earnings growth in recent years amid growing competition from automated, algorithmic trading and reduced arbitrage opportunities which have compressed traditional margins.
Last year’s trading earnings were also crimped by a switch from a contango to a backwardated oil price structure — where spot prices persistently exceeded forward prices — hitting profits from buying and storing oil in the hope of selling it for higher prices in the future.
In December, rival oil and metal trader Trafigura reported oil trading volume growth of 7.5% to 275 million mt in the year to September but said its trading earnings fell 10% in the period to $1.02 billion.

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