Commodity trader Trafigura said its LNG volumes dropped 13.8 percent in the fiscal year ending September 30 while the company’s profit rose.
LNG volumes declined to 11.2 million tonnes compared to 13 million tonnes during the same period last year, which also declined from the previous year.
However, the Geneva-based trader reported a profit of $7.4 billion, compared to $7 billion in 2022, while its revenues decreased 23 percent to $244.2 billion.
The total volume of commodities traded in 2023 was lower year-on-year to 298.8 million tonnes.
Trafigura traded an average of 6.3 million barrels of oil and petroleum products, including gas and LNG, per day in the financial year 2023, compared to the daily average of 6.6 million barrels in 2022.
The firm said it has now stabilized its oil volumes following the termination of long‑term contracts of Russian crude oil and petroleum products with state-owned companies ahead of international sanctions which took effect in May 2022.
“Fundamental changes”
Trafigura said in its annual report that FY2023 was characterized by “fundamental changes” in the way gas flowed across Europe due to the lack of Russian supply and the region’s newfound dependence on LNG.
Higher LNG imports from the US, Asia, and Middle East combined with increased pipeline supplies from Africa, Azerbaijan, and Norway resulted in a complete change of trade flows in Europe, which for the past 70 years have predominately flowed from east to west, it said.
This led to wide differentials in prices at key delivery points.
“Against this backdrop, our strategy of building a pan‑European flexible portfolio with a strong focus on storage and pipeline capacity paid dividends with our European business reporting strong results,” Trafigura said.
The company expanded into markets that have previously been dependent on Russian gas, including Slovakia, Hungary, Czechia, and Austria.
Trafigura said it was one of the few companies to inject gas into Ukraine storage as EU storage approached capacity.
“In the US, we continued to focus on exports by using our pipeline transportation network to carry gas from the Permian and Eagle Ford Basins to the Gulf Coast and Mexico markets,” the firm said.
In the coming years, this is a business Trafugura expects to grow as global gas markets become more interconnected.
US natural gas prices fell substantially at the start of the year and subsequently traded in a narrow range near $3 per million British Thermal Units (Btu) reflecting a mild winter, relatively robust supply, and high storage levels, the firm said.
This was in marked contrast to Europe, where prices remained volatile. After spiking to more than EUR300 per megawatt hour in the summer of 2022, prices eased as a mild autumn delayed the start of the heating season and storage sites filled up, Trafigura said.
As it became clear that Europe would avoid a winter gas crisis, prices continued to retreat and by the spring were at the lowest level since the build up to the war in Ukraine, it said.
However, the market remained volatile as highlighted during the summer when concerns about supply disruptions in Australia triggered a surge in prices, the trader said.
Gas prices in Europe to remain “unstable”
Trafigura said that its LNG services “remained in high demand” throughout the year.
The company brought LNG cargoes to Europe when they were needed and diverted them away when storage was nearing capacity, it said.
In Asia, the company continued to be a “reliable supplier for traditional demand centers and new locations.”
“Our ability to adjust to changing market conditions during the year owes much to our strong presence in shipping and the close collaboration between our LNG and natural gas teams,” the trader said.
Looking forward, Trafigura expects gas prices in Europe to “remain unstable until a wave of new LNG projects come on stream later in the decade.”
Until then, Europe will have to compete with Asia for LNG cargoes, it said.
“Our strategy will be to remain agile and respond to changing customers’ needs by drawing on the size and scale of our operations and our integrated approach,” the trader said.