The kind of crazy up-and-down movements of the oil markets in recent weeks and months is not a ripe opportunity for a major trading company like Vitol. In fact, its CEO and chairman Ian Taylor says that whipsaw activity is a nightmare for his company.
“A market that is up $3 in the morning, down at lunchtime and then back up again at the close is almost impossible to hedge,” Taylor said in a one-on-one interview this week as part of the Platts Global Energy Forum. “I don’t think the trading companies do particularly well in that environment.” (Full disclosure: I conducted the interview with Taylor at the forum’s luncheon.)
And contrary to some beliefs, a relatively calm market that goes on many months — like the first part of 2014 — isn’t quite as bad as it might seem. “You’re making an assumption that traders speculate,” Taylor said when asked whether the first relatively non-volatile part of the year was a difficult time for a trading company. “Hardly any trading companies in existence today speculate. Shell, BP, Vitol…we don’t do flat price trading. A predictable long-term trend is much easier to handle.”