Trafigura Posts Record Profits at Height of Energy Crisis

Trafigura, the multinational oil company, posted record profits in its most recent fiscal year, surpassing the previous four years combined. This achievement was possible due to an energy crisis destabilizing commodity prices following the Russian invasion of Ukraine.

Trafigura reported on Thursday that sales through September increased to $322 billion. Christophe Salmon, the French group’s chief financial officer, said that the oil and oil derivatives business had a very successful year. Trafigura has distributed dividends totaling over $1 billion after realizing profits.

In fact, according to Salmon, this has been one of the most profitable times in the history of the commodities market, which is largely due to the war in Ukraine. Other competitors, including Glencore and Vitol, have also posted record-breaking results.

The uncertainty caused by the tension between Russia and the West has accelerated the European Union’s efforts to secure its energy reserves, which are highly dependent on Kremlin decisions. Russia supplied nearly 40% of Europe’s natural gas, 30% of its oil imports, and 46% of its coal in 2021.

A new commitment to deliver substantial volumes of gas to the European gas grid and, ultimately, Germany over the next four years was fulfilled by Trafigura signing a $3 billion four-year loan backed by Deutsche Bank.

In a video released alongside the earnings report, the French company’s CEO, Jeremy Weir, said, “We are interacting with governments and regulators significantly more by providing market intelligence information.”

The volatility in the energy market has been a boon for energy companies. However, their liquidity has been jeopardized by a tenfold increase in the collateral requirements on the derivatives market since 2020. The value-at-risk of Trafigura, which measures the maximum possible loss in a trading day, quadrupled during its fiscal year to $199.8 billion.

Thus, this fiscal year’s earnings will allow commodity traders to increase their bank funding by bolstering their cash reserves. This year, Trafigura added $7 billion to its credit line, which is now $73 billion. Following the release of positive results on Thursday, the company is worth more than $15 billion.

However, not all of the news was positive for the French group. While its energy division posted record profits, its metals division’s profits declined by 24% due to China’s Covid zero policy-related blockades.

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