Glencore upbeat on H1 earnings on lift from strong oil trading

Highlights

Trading supported by oil price collapse

Oil majors also reporting strong trading boost

London —
Glencore expects to report “very strong” trading earnings for the first half of the year, the mining and commodity trading giant said July 31, as trading activity benefits from the huge price swings in the wake of the COVID-19 pandemic.

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Trading earnings were boosted by a “sizeable increase” in carried inventory transactions while oil trades saw a “significant reduction” in net payables position due to the oil price collapse, Glencore said.

“Our marketing business has also risen to the challenge, delivering robust counter-cyclical earnings,” CEO Ivan Glasenberg said in a statement.

As a result, Glencore said it now expects its pre-tax earnings to come in at the top end of its $2.2 billion to $3.2 billion guidance range for the full year.

In 2019, Glencore’s energy trading unit reported an adjusted pre-tax profit of $1.32 billion. Last year the group sold 973 million barrels of crude and 779 million barrels of oil products.

Rival trader Trafigura saw its earnings from trading oil jump during the first half of the year as the world’s second-largest independent oil trader benefited from a spike in price volatility and supply dislocations due to the coronavirus pandemic.

The trading divisions of European oil majors have reported strong earnings for the second quarter, largely helped by contango storage plays where oil bought at lower prices is stored and sold later at higher values.

On July 30, French oil major Total said its trading operations made about $500 million above normal earnings during the second quarter of the year.

Glencore is due to report its full H1 earnings on August 6.