"Oil trading giant Vitol suffered heavy losses in the Iran war, Chinese star derivatives trader faced massive losses."

A surge in oil prices triggered by geopolitical conflict has cost Vitol, the world’s largest oil trader, dearly. At the eye of the storm is star Chinese trader Yaoyao Liu.

According to The Wall Street Journal, Liu’s team suffered losses of up to hundreds of millions of dollars due to mistaken bets on oil derivatives in the early stages of the Iran war. Bloomberg reports that Vitol is reorganizing its London derivatives team, with some traders possibly leaving, and the rest merging into teams focused on physical trading in individual markets.

Vitol is a giant in global commodity trading, buying and selling 8 million barrels of crude oil daily. Its 2025 revenue is projected at $343 billion, surpassing ExxonMobil. About 600 employees have equity in the company, which ranked among the world’s most profitable traders during the Russia-Ukraine conflict.

Star trader bets in the wrong direction

Citing sources, the Wall Street Journal reported that Liu allegedly held two key positions: One betting that diesel prices would rise relative to jet fuel; the other betting that Dubai crude would fall relative to Brent crude. The logic behind these positions was to bet that the Trump administration would back off from military confrontation, avoiding direct conflict.

However, the outbreak of war and Iran’s blockade of the Strait of Hormuz caused prices to move opposite to these bets—in the first week of conflict, Singapore jet fuel prices soared over 70%, and Dubai crude surged due to the blockade, leaving multiple positions trapped.

In addition, derivatives contracts previously sold by Vitol to hedge Middle East cargo price risk became short oil market positions as prices spiked, amplifying losses overall.

However, sources say Liu’s team subsequently recouped some of the initial losses. As the market gradually digested extreme price disparities, the team adjusted positions and recovered part of the losses.

Yaoyao Liu is well-known for his bold moves in trading circles. He graduated from Cambridge University in chemical engineering and published papers on quantum chemistry. Born in China, he previously worked at Goldman Sachs before joining Vitol in 2012. Sources state that several Wall Street commodity hedge funds tried to recruit him, but Liu remained at Vitol.

In 2022, he generated about $2 billion in trading profits for Vitol, with executives at rival firms even studying his trading patterns. He has teams of analysts and traders in Dubai, London, and Houston. His operation is regarded internally and externally as an internal hedge fund. To prevent competitors and even colleagues from knowing his positions, Liu’s holdings are highly confidential within the company.

War's impact spreads; physical business under pressure too

Besides derivative losses, the Iran war also hit Vitol’s physical business hard. The Wall Street Journal reported that within weeks of the US and Israel attacking Iran, two fuel ships chartered by Vitol in the Persian Gulf were attacked, resulting in the death of a crew member.

The Strait of Hormuz blockade prevented Vitol from shipping Persian Gulf oil and LNG it had purchased, forcing the company to urgently seek alternative supplies to fulfill contracts. At the same time, derivatives contracts previously sold to hedge Middle East cargo price risk turned into short oil positions as prices soared, further worsening losses.

Vitol has briefed banks about some of these difficulties, including large insurance and freight bills from ships trapped in the Persian Gulf at the end of March, but hasn't disclosed detailed figures. Some staff have left the company’s Bahrain regional headquarters.

Company remains profitable overall; restructuring currently limited to London

Despite the scale of losses, Vitol’s overall financial position remains stable. Bloomberg sources say the company was profitable both in March and throughout the first quarter.

On liquidity management, Vitol arranged a $30 billion credit line to cope with potential large margin calls from commodity trading, but hasn’t used it yet. The company relies less on debt financing than some peers, giving it a buffer.

Bloomberg reports that the derivatives team restructuring is currently limited to London, and decisions have not yet been finalized and may change. The direction is to merge derivatives traders into physical trading teams focused on individual markets, rather than maintaining the existing centralized derivatives trading structure. Vitol declined to comment on changes to its derivatives business or performance.

The derivatives team restructuring takes place amid senior management changes at Vitol. Bloomberg reports the company recently announced that longtime CFO Jeff Dellapina will soon depart, with the derivatives team changes intertwined with this management transition.

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