The world’s largest oil trader Vitol has bought the other half of storage firm VTTI for $830 million, taking full control of tanks that contributed to its stellar profits amid oil price volatility.
Vitol’s and other trading houses’ profits rose steeply in 2014 due to price volatility and a market structure known as contango, when long-dated prices are higher than prompt prices. Contango encourages oil storage in tanks for the purpose of reselling the commodity at a profit in the future.
VTTI has total gross storage capacity of 54 million barrels, including assets under construction, the company said.
As oil prices tumbled again in August, the contango structure will likely prevail as most market watchers say prices will have to recover in the future when producers of more expensive crude start cutting output.
Vitol said in a statement on Friday its unit, Vitol Investment Partnership, bought the 50 percent VTTI stake from Malaysian shipping company MISC Bhd. VTTI will continue to operate independently under Chief Executive Rob Nijst.
“For MISC, this divestment will enable us to unlock the value of our investment in VTTI and take advantage of future opportunities within our core business of energy and petroleum related shipping,” MISC President and Chief Executive Yee Yang Chien said.