Vitol CEO Taylor Says Oil Price Underpinned by Libya Supply Halt

Apr 01, 2014 9:36 am ET

April 1 (Bloomberg) -- Oil supply disruptions in countries such as Libya will support crude prices this year, said the chief executive officer of Vitol Group. Booming U.S. output means the world’s largest independent oil trader is looking to invest more there, he said.

Libya has “severe problems” and is producing “extremely little” crude, Ian Taylor said in an interview at the FT Commodities Global Summit in Lausanne, Switzerland. This is important for Europe, where oil demand has been higher than expected this year, he said.

“Since the year has begun, we’ve still continually run into supply problems,” Taylor said. Any expectation of the oil price “going down significantly, I think for the time being, will have to be perhaps put on hold,” he said.

Libyan oil output fell to 250,000 barrels a day in March, down almost 50 percent from January, according to data compiled by Bloomberg. Deutsche Bank AG today raised its estimate for Brent crude prices in 2014 by 9.2 percent to $106.50 a barrel because of production losses in countries including Libya and stronger-than-anticipated demand in developed nations.

U.S. Boom

The U.S. shale oil and gas boom has prompted commodity traders to invest in pipelines and terminals. “You are likely to see us continue to do more and more in the U.S.,” said Taylor. While Vitol isn’t “racing out to find more assets at the moment,” it will continue to focus on North America for potential investments, he said.

U.S. crude production rose to 8.2 million barrels a day in the week to March 14, the most in almost 26 years, according to data from the Energy Information Administration. The drilling of shale oil fields from North Dakota to Texas has put the U.S. on the path to energy independence.

Morgan Stanley’s stake in TransMontaigne Inc., the Denver- based petroleum and chemical transportation and storage company, “could be interesting” for Vitol, Taylor said. The assets won’t be sold cheaply because “in the U.S., obviously it’s much more attractive,” with strong margins and a larger, deeper private equity market, he said.

Commodity traders are responding to shrinking profit margins from trading because of reduced swings in commodity prices and fewer opportunities to exploit variations between different geographical markets. Trafigura Beheer BV, the third- largest independent oil trader, said in its annual report that 2013 profit excluding one-time gains from divestments fell by 2 percent compared to the year before.

Hard Assets

That’s prompted Trafigura, Gunvor Group and other Vitol competitors to buy commodity storage facilities, terminals, ports and mines to wring efficiencies from them when combined with their trading units.

Vitol agreed in February to pay about $2.6 billion for Royal Dutch Shell’s downstream assets in Australia, including the Geelong refinery and fuel station business. The Amsterdam- registered trading firm, with major operations in London and Geneva, made the acquisition in partnership with Abu Dhabi Investment Council.

Trafigura last year teamed up with another Abu Dhabi-based sovereign wealth fund, Mubadala Development Co., in a deal to buy a controlling stake in a Brazilian iron-ore port for $400 million.

Vitol Group’s sales expanded by 1.3 percent to $307 billion in 2013 from the year before, the company said on March 24. Vitol does not disclose profit. The company traded 276 million metric tons of crude oil and petroleum products last year.