Top global oil traders: Volatility is decreasing

The world’s top commodity merchants are grappling with a tougher environment for trading oil as seismic market events of the past few years start to lose their impact.

The narrowest volatility of oil since 2004

The slowdown is impacting everyone, from major players like Glencore Plc and Gunvor Group — both seeing a decline in profits — to hedge fund manager Pierre Andurand, who shifted focus from oil trades to copper and cocoa bets. While industry giants remain profitable, the windfall profits seen since 2020 are no longer materializing at the same scale.

Back then, oil prices briefly flicked into negative territory when Covid-19 trashed demand at a time when Saudi Arabia-led OPEC was maintaining high levels of supply. Just under two years later, Russia invaded Ukraine bringing rich pickings as futures surged and diesel spreads boomed. Now, the volatility that’s the lifeblood of trading has been depressed because the market has absorbed those issues.

“The markets over the past several years were trending markets,” said Kurt Chapman, the former head of crude oil at Mercuria Energy Group, who now heads up the oil division at Levmet UK Ltd. “Whether they were massively bearish because of Covid and physical traders could store barrels, or going the other way with Ukraine. This year has been a challenging year because there hasn’t been obvious physical trading opportunities.”

In 2024, price fluctuations have been considerably more subdued compared to previous years, despite crude's recent dip toward $70. Brent futures are currently on track for their narrowest annual price range since 2004, and earlier this year, a market volatility index reached its lowest point in nearly a decade.

Lower Profits

The challenging market environment is already reflected in published earnings. As oil traders descend on Singapore this week to strike deals during one of the biggest weeks in the industry calender, the tough trading environment is a key conversation topic. Another, though, is the change to oil flows around the world as a result of global conflicts.

Glencore's energy division reported its lowest half-year profits since 2018, driven by slimmer margins in oil and coal trading. At Torbjörn Törnqvist's Gunvor, the shipping and freight division became a larger contributor to overall earnings.

"It's a bit of a challenging environment," Törnqvist said in an interview in Singapore, referring to the broader oil market.

To offset market difficulties, Gunvor has been trading more. The company’s latest financial results show it hit record levels of crude and oil product volumes in the first half of the year.
Meanwhile, a Swiss oil trading unit at Freepoint Commodities LLC experienced significant losses earlier this year, leading to traders leaving, according to a source. Freepoint declined to comment.

For traders and market observers, the key focus is on whether Brent oil can hold below $74.30, a level that would maintain the bearish trend. If the price fails to sustain this level, the next downward target is $71.60, a critical support area that could signal further bearish sentiment if it is broken.