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World’s leading energy trading houses grapple with the dilemma of managing cash reserves

As the premier energy trading firms prepare for their annual industry gathering in London this week, they are confronted with a significant quandary: how best to utilize their substantial cash reserves.

Despite maintaining a shroud of secrecy surrounding their financial standings, sources suggest that major entities such as Vitol, Trafigura, Mercuria, and Gunvor collectively hold billions of dollars in surplus, even after disbursing record dividends.

An unidentified executive from one of these prominent trading houses confided to Reuters, stating, “We rely much less on bank borrowing and are awaiting favorable investment opportunities. However, those are scarce, particularly within the unprofitable green energy sector.” This observation underscores a prevailing trend among trading houses to seek out lucrative ventures amid an environment characterized by sluggish growth in renewable energy segments such as wind, solar, and hydrogen.

Reports indicate that Vitol, the preeminent trader globally, has bolstered its overall equity to an astounding $26 billion, with forecasts suggesting a potential increase to nearly $30 billion based on its performance in 2023.

Likewise, Mercuria and Gunvor have each accrued approximately $6 billion in equity and retained earnings in recent years, according to insider accounts. Nevertheless, all three companies opted not to comment on these specific figures. Conversely, Trafigura divulged a notable expansion in its equity to $16.5 billion in its most recent disclosure.

Despite these substantial amounts, the equity of these trading behemoths still falls short in comparison to oil majors such as Shell and BP.

The conundrum of cash confronting these trading houses is anticipated to be a central topic of discussion during International Energy Week in London.


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