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What do you think about the big profits made from goods during the war in Ukraine? Take part in the discussion below. The results are the first look at how the giant oil and commodity trader did in the first five weeks of unrest sparked by Russia’s invasion of Ukraine. Buyers in Europe and the United States avoided Russian oil, while India picked up the barrels cheaply. Sanctions have since blocked most of the work done by European traders such as Trafigura with Russia’s largest crude producer, pushing Moscow to find new ways to export oil. The upheaval pushed world oil prices soaring, with Brent crude hitting a 14-year high of about $ 139 a barrel in March. The international benchmark has fallen but remains 70% higher than a year ago at around $ 123 a barrel. Diesel and gasoline prices continue to hit record highs. Singapore-based Trafigura, based in Geneva, was at the center of the unrest. It was the largest Western exporter of Russian oil before the invasion, having worked closely with state-owned producer Rosneft PJSC. The company says it has scrapped much of the business since the war broke out to comply with sanctions imposed by the European Union and Switzerland.

Trafigura, led by CEO Jeremy Weir, has increased its lending to address recent market volatility.

          Photo: DENIS BALIBOUSE / REUTERS

A big question among traders was whether Trafigura would raise money from haywire transactions or suffer as it left parts of its Russian operations and prices for Russian oil tanks. Friday’s results show that Trafigura made big profits, although the company did not show how much money it made before and after the invasion. Many traders expect commodity prices to remain high, halting the global economic recovery from the pandemic and increasing pressure on consumers and businesses from rapid inflation. Metal and energy reserves are at historic lows and will find it difficult to meet a sustained recovery in demand, Trafigura said in its semi-annual report. Unprecedented gains and losses in energy prices preceded the invasion, starting with rising gas and electricity prices in Europe and Asia last fall. Traders like Trafigura generally do not bet on markets. Instead, they use extensive logistics and financial functions to raise money from price gaps between regions or at different times. Trafigura has the accounting weight and balance sheet to earn more than most. It handles more than seven in every 100 barrels of oil consumed worldwide, along with huge volumes of metals, coal, gas and other commodities. The company has interests in mining, logistics and industrial-metal activities and has a hedge fund. Trafigura is owned by its partners, but bonds are issued to finance its large business in public trade.

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Important news for financial markets and transactions. Instability has brought challenges. Trafigura, like other merchants, relies on borrowed money to finance the merchandise of its ships around the world. Higher and volatile prices have pushed the company to borrow billions of dollars more to finance oil, metal and liquefied natural gas shipments and make larger stock market advances. The industry’s cash squeeze has worsened trading conditions in futures markets and will make it more difficult to trade natural goods forward, Trafigura said. With the exception of one African oil subsidiary, Trafigura had $ 73 billion in credit lines by the end of March from 140 banks, of which $ 7 billion had been raised in the past six months. A pending question is the fate of an Arctic oil project in which Trafigura sank $ 1.5 billion, equivalent to $ 1.58 billion, its own money along with 5.5 billion euros borrowed from a group of banks. The company has frozen 10% of its stake in Rosneft Vostok Oil and says it intends to sell it. It is possible to suffer a loss. Trafigura said the investment and related deals – which included deals to buy Rosneft oil – were valued at a negative $ 610.1 million by the end of March. This is lower than the positive $ 862.2 million at the end of September. Oil deals have now been canceled, Trafigura said. Write to Joe Wallace at [email protected] Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8