Mercuria’s profits surged to a record in the first half of the year as the oil market storm sparked by the coronavirus crisis kicked up lucrative opportunities for global energy traders.
The privately owned company recorded net income of $425m in the six months to June, up more than $100m from the same period last year, according to people briefed on unaudited figures revealed during a loan refinancing.
In the second quarter, when US oil prices turned briefly negative as plummeting global demand threatened to overwhelm storage facilities, the Geneva-based group’s net income hit a record $277m.
The figures underline how chaos in the oil sector can play to the advantage of Mercuria and its competitors, whose trading operations make money from differences in oil and fuel prices around the world.
Commodity trader Trafigura last month reported record profits for its oil and refined fuels division in the six months to the end of March, driven by “significant volatility and dislocations in the global market”.
After a tough start to the year, trading profits at the world’s biggest independent oil trader Vitol have also picked up, bankers say, after the company bought cheap crude to store and lock in earnings by selling forward in the futures market.
Mercuria, founded in 2004 by former Goldman Sachs traders Marco Dunand and Daniel Jaeggi, trades more than 2.4m barrels of oil a day.
As well as crude, Mercuria also has a large gas and power business and has access to storage at Cushing, the delivery point for West Texas Intermediate crude oil futures, one of the most active commodity derivatives in financial markets.
The WTI contract plunged into negative territory for the first time ever on April 21, falling to as low as minus $40 a barrel as traders were forced to pay rivals to take barrels off their hands, with those unable to access storage at Cushing caught short as the May contract moved towards expiry.
Unlike some of its peers, which are primarily focused on physical oil trading, Mercuria has also pushed into financing, offering clients complex services more akin to those offered by investment banks.
In 2014 it bought part of JPMorgan’s physical commodities trading business to bolster its operations, as Wall Street backed away from the business of shipping oil and metal under regulatory pressure.
In a recent interview with the Financial Times, Mr Dunand said the oil market had turned the corner and was set to recover but warned that should there be a second wave of the virus, “all bets are off”.
Both US crude and international marker Brent have recovered to about $40 a barrel since the peak of lockdowns in April, as demand has picked up and supply has fallen. Opec and Russia have cut back production to help bolster the price, while output in the US and Canada has weakened.
Prices have come under pressure in the past week, however, as the sharp rise in US Covid-19 cases unnerved traders.