Market overview

Despite macro uncertainties and headwinds, the global markets for oil, gas and refined petroleum products presented a much more favourable environment for trading in 2019 than in the previous year. Geopolitical tensions and trade conflict created volatility in prices and flows and, in most segments, significant opportunities for Trafigura’s core business of physical arbitrage based on price differences in time and location.

Chief amongst these dislocations has been the continuing change in the global trade flows of oil. We have been moving away from a world where the primary oil trade was crude from the producers of the Middle East, Africa and Latin America moving to the US and Europe. Instead, with the rise of Chinese and now Indian demand, those crude barrels are increasingly moving eastward rather than westward. Growing urbanisation in Asia has boosted consumer income and spending, particularly on energy and transportation.

Another part of this transition has been on the supply side, namely the rise of the US as the world’s largest crude producer. This rapid rise in production has led to significantly reduced demand for crude imports into the US, pushing those barrels back out into the market, particularly towards the Eastern markets. Over the last four years, the US has grown its own exports to the point where it exports more volumes than any OPEC member except Saudi Arabia. The destinations for these barrels have changed numerous times over the last few years as ebbs and flows in demand economics have in turn meant that the appeal and viability of US barrels into certain markets has evolved. But Trafigura’s global footprint and access to demand opportunities has meant that we have been able to fully address these dislocations by increasing our US exports to European homes while also increasing the traded amount of our European and West African barrels into Asia.

Trafigura performance

A number of both crude oil and product markets were backwardated through the year, meaning that spot prices were higher than forward prices.

However, this did not impede our ability to generate margin and highlighted the robustness of the Trafigura physical trading model. On the contrary the division had an exceptionally strong year almost across the board. Volume was steady at 292 million metric tonnes, approximately 6 million barrels per day, while divisional gross profit increased by almost 64 percent to USD1,681 million, from USD1,022 million in 2018. We maintained our market leadership in key growth segments such as LNG, while further building our strength as a leading player in the US, now a key hub of the global industry thanks to rising production of shale oil and gas. Our access to flows of light sweet crude from the US, and to associated infrastructure, has become a key competitive advantage in the global arbitrage business. It also means we are well positioned to help our customers navigate the anticipated market disruption resulting from the introduction of IMO 2020, a rule lowering sulphur limits in marine fuel – another key market driver for this past year and next.

We derived maximum benefit from the careful but significant restructuring of the division in 2018. Key moves included the establishment of a new leadership team, the injection of new talent, the restructure of our Derivatives and Execution function and the establishment of a dedicated in-house bunkering team. The team works alongside our fuel oil and middle distillate desks in order to serve the marketplace more effectively in preparation for IMO 2020.

The restructuring has created a stronger and more stable division, with lower staff turnover and a strong culture of collaboration. We have continued to hire and promote promising talent to reinforce our regional offices and product teams. Working together in this way has enabled us to deepen our relationships with clients, including refiners, and to build a very strong book of forward business.

Oil and Petroleum Products volumes traded (mmt)
Crude oil
Fuel oil
Liquefied natural gas (LNG)
Liquefied petroleum gas (LPG)
Middle distillates
Natural gas

Crude oil

The crude oil market was in a state of backwardation throughout the year, with spot supply constrained by such factors as the impact of US sanctions on Iranian and Venezuelan crude exports. At the same time geopolitical concerns and the ongoing trade conflict between the US and China drove volatility in both prices and flows.

This was a favourable trading environment for the crude team, which had an excellent year expanding both volumes and profits. We extended our lead as the largest exporter of US crude, with flows growing further from August onwards, thanks to shipments through the Plains All American Cactus II pipeline linking the shale fields of the Permian Basin to a storage and loading terminal on the Gulf Coast. Access to this infrastructure gives us a unique and highly efficient means of channelling premium quality US crude oil to global markets. It means we can take full advantage of profitable arbitrage opportunities into Europe and Asia and build deeper client relationships with Asian refiners. At the same time, we maintained our long-term supply relationship in the Urals market and built Middle East crude volumes during the year. Overall, physical margins improved markedly over 2019.

With these favourable trends set to continue, and a very strong crude oil trading team, we are optimistic about performance in 2020. We expect US volume to continue to grow, demand for US light sweet crude to gain extra momentum from IMO 2020, and margins to continue to build.


It was a volatile year in the global gasoline market, with a period of oversupply and depressed pricing during the first half of our fiscal year followed by rising prices and volatility from February 2019 onward. The change came as refiners minimised gasoline yields to rationalise production and was intensified by a significant number of unplanned refinery outages.

In this rapidly moving market, Trafigura’s global gasoline team was very well positioned to capture volatile interregional arbitrage opportunities. Overall gasoline volumes were slightly lower compared to last year, but margins were better than in 2018.

In 2020, we expect gasoline supplies to remain tight and volatility to be high as refineries adjust for IMO 2020 and make a full transition into US Tier 3 Sulphur.

Fuel oil and Middle distillates

Volatility was also the dominant characteristic in fuel oil and gasoil as the markets prepared for IMO 2020. The reduction in bunker fuel sulphur specifications from 3.5 percent to 0.5 percent is one of the largest regulatory changes in the industry’s history. It is having a huge impact on fuel oil and distillate flows but has also connected the balances and specifications of these products as they now share a pool of demand. The high-sulphur fuel oil market was tight in 2019 as a result of US sanctions which reduced supplies from Venezuela and Iran. However, the prospective removal of 50 percent of high sulphur fuel oil (HSFO) demand under IMO 2020 weighed heavily on the back of the curve, leading to extreme volatility and disconnects between paper and physical markets, and enhanced physical arbitrage opportunities.

For Trafigura, it was the first full year of trading as an integrated gasoil, fuel oil and bunker business. We decided to merge these operations in 2018 in preparation for IMO 2020. This allowed us to approach the market in a cohesive, client-focused manner, to the point where we are now one of the leaders in supply of RMG fuels specification to some of the world’s largest bunker consumers. Our overall volumes were slightly down on 2018 as the team focused on the most profitable business as opposed to market share. Profitability increased strongly. We will continue to focus on the bunker fuel market in 2020.

During 2019, Trafigura and leading ship owners Frontline Ltd. and Golden Ocean Group Ltd. announced an agreement to establish a leading global supplier of marine fuels. Trafigura will contribute its existing physical bunkering operations to the joint venture and owns 75 percent interest. The joint venture, TFG Marine, is expected to commence operations in the third quarter of 2020 and will act as the exclusive purchaser of marine fuels for Trafigura, Frontline and Golden Ocean.

Our priority will be to work with our customers to find the most cost-effective and reliable solutions for continuity of supply amid the uncertainty and volatility created by IMO 2020. This includes our bunker customers managing a new specification and price set, but also extends to our traditional diesel customers who will see the knock-on effects of IMO 2020 in the form of increased demand and potential disruptions to supply.

Liquefied petroleum gas (LPG)

The global LPG market continued to grow in 2019, driven by rising supply from the US and increasing demand in Asia, especially in China and India. US exports rose dramatically to reach levels rivalling those from the Arabian Gulf. At the same time, the trade conflict between the US and China and US economic sanctions on Iran and Venezuela had a disruptive influence on trade flows, with China absorbing the vast bulk of supplies from the Middle East and the US becoming the supplier of choice for the rest of the world. These changes in turn created a tight freight market by increasing the aggregate length of voyages for LPG freight.

Trafigura’s LPG team had a challenging year dealing with the impact of changing LPG flows and long-term purchase and supply agreements. However, on the shipping side we took delivery of four Very Large Gas Carrier vessels on bareback charter, which alongside our time charter fleet, give us a good position in current strong market. Further to this, we have continued to invest for the future with an order for the first LPG carriers able to burn LPG as a fuel. As well as being the most CO2 efficient LPG ships built to date this gives both the trading and shipping section of the book the most technologically advanced freight position in the market.

Looking forward, we are optimistic about 2020. In addition to upside in the shipping market, we see further growth in US exports following a wave of infrastructure investment and continuing market volatility. Towards the end of 2019, our global LPG trading team was restructured to enable it to take advantage of these conditions.

Naphtha and Condensates

Pronounced volatility and new supply marked naphtha and condensates markets in 2019, with the US acting as the key driver of change. As production of light crude from the US shale fields continued to rise, so did the availability of competitively priced naphtha and condensates for use in a variety of applications in international markets, including as feedstock for petrochemical manufacturers and refiners, diluent for producers of heavy crudes, and a component for blending gasoline.

Trafigura remained a market leader in 2019 with a strong position in all key producing and consuming countries. Thanks to access to infrastructure in the US Gulf Coast at Corpus Christi, we were well placed to efficiently source and channel the new abundant supply to the global waterborne market and to rebalance flows in the event of market disruptions. We trade naphtha and condensates in one global team working closely with other trading desks such as gasoline and crude oil. This gives us agility, flexibility and speed in identifying market opportunities, and we made the most of these capabilities during the year to enhance profit margins on a trading volume broadly comparable to the 2018 level. Geopolitical events such US sanctions on Iran and Venezuela, global trade tensions, and events in the Middle East, impacted global premiums, notably in the Far East, creating trade flow distortions which became trading opportunities for our naphtha and condensate flows, excluding Europe and the US, as well as for new condensate supplies from Australia. We also saw increased opportunities in Latin America in 2019.

Looking ahead, we see volatility persisting into 2020, with the implementation of IMO 2020 creating an additional source of potential market dislocation as US supplies of naphtha and condensate continue to grow. We expect to maintain growth on the strength of our diversified global trading model.

Liquid natural gas (LNG) and Natural gas

The global LNG market continued to grow rapidly in size and complexity in 2019, driven by abundant new flows from the US and Russia, the development of a more liquid spot market in the Far East, and sustained low gas prices resulting in a record amount of LNG being delivered to Europe. More countries are buying LNG, and buyers are becoming more flexible and more willing to buy from the spot market as opposed to traditional long-term contracts, recognising that security of supply can better be provided on a liquid, open and transparent spot market. With supplies plentiful and prices low, a significant driver of demand was gas-for-coal switching among power utilities both in Europe and across Asia.

The LNG team strongly increased volume, with growth up 27 percent to 12.6 million metric tonnes equivalent. This year marked the start of shipments under our 15-year offtake agreement with Cheniere and several other mid-term contracts. With weak demand in Asia redirecting trade flows, the European market absorbed the bulk of our Atlantic cargoes, often in conjunction with our natural gas desk, while we continued to build our position in the Far East with regionally sourced LNG.

Given the greater integration of global gas prices, we reaped considerable benefits from our integrated approach to trading LNG and natural gas in one team.

Our natural gas book grew significantly during the year, both in scale and scope. Volume traded grew by 147 percent to 17.1 million metric tonnes equivalent. We were again the largest supplier of natural gas to Mexico from the US, while in Europe we expanded our business, in particular in Spain, Italy and the UK. We increased sales in Ukraine despite ongoing political uncertainty, and we remain committed to this market. We continue to grow our footprint in new gas markets: for instance, this year we became the first foreign company to acquire a gas sales license in Pakistan.

Looking ahead, we expect the pattern of growing LNG production, increasing demand and greater market liquidity and transparency to offer more opportunities for our integrated LNG/natural gas operation in the US, Europe, Asia and Latin America.


Biodiesel remained a challenging market in 2019 as prices continued to eliminate the potential for discretionary blending. Regulatory uncertainty in the US and Europe on matters such as US tax and renewable fuel policy, as well as anti-subsidy duties on various biodiesel imports being dropped by the European Union as they were adopted in the US, created further obstacles for the biodiesel business. Global commitment from consumers and regulators alike remains firm in calling for increased penetration of renewable fuels into the energy mix. In response, Trafigura maintains expertise to evaluate and act on market movements as they occur.

Derivatives and Executions

In 2019, Trafigura restructured and significantly enhanced its Derivatives and Execution function to bolster the Oil and Petroleum Products Trading division’s propriety trading capabilities.

This now 20-strong team is headed-up by a longserving senior physical trader and supported by a number of derivatives specialists from a range of financial backgrounds operating out of each of our key regional trading hubs in Geneva, Houston and Singapore.

The Derivatives team works closely with each physical trading desk, sharing information and placing data at the core of its work. Through its use of new technologies in trading, including advanced analytics, the new team will enable us to evolve and diversify our business practices in line with the changing oil market and influx of significant financial flows influencing prices, and to manage the challenge of competing with automated trading.

With a secure supply network, Trafigura is the leading US crude exporter

Over the last five years, Trafigura has been building its West and South Texas operations to ensure it provides low-cost, high-value supply for customers and counterparties across the supply chain.

Our footprint is anchored by our physical crude operations team working in the field, by long-term commitments on pipelines and by our access to private dock solutions at the Port of Corpus Christi.

Our wellhead to vessel supply chain enables Trafigura to deliver consistent, rateable and neat Midland barrels to our customers, avoiding the challenges of co-mingled product from other North American sources and third-party terminals that exist elsewhere in the US.

In West Texas, we collaborate with our customers to provide wellhead solutions to gather and aggregate volumes across the Permian Basin. These volumes move through the Cactus II pipeline, in which Trafigura is the anchor shipper, with 300,000 barrels per day of capacity. We deliver these volumes into our segregated tanks in Corpus Christi, at the NuStar and Buckeye facilities, ensuring quality and consistency. Finally, our operations team manages our own vessel loading and export programmes, working with customers to provide a secure and reliable supply of high-quality neat Midland crude oil to customers across the globe.

2019 Annual Report
2019 Annual Report

2019 Annual Report

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