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OW Bunker has today (October 23) reported an unrealized accounting loss of USD 24.5 million for the third quarter of 2014 - USD 2.5 million higher than the USD 22 million loss forecast by the company on October 7.

In a statement, the company said: "Since a jump in the oil price to a 9-month high of above USD 115 (Brent) in the second half of June 2014, the oil price dropped around 20% in Q3 2014 to the lowest level in over two years. This steep fall led to market disruptions in September, and negatively affected the risk management as well as other parts of the business.

"The oil price development included a structural change in the oil futures market from backwardation to contango. Backwardation is the predominant market structure, and the sudden structural change in late September had a negative effect on risk management."

Marine fuel transaction volume during the third quarter rose by 2% to 8.01 million tonnes (Q3 2013: 7.82 million tonnes). Volume sold in the first nine months of 2014 was 22.88 million tonnes compared to 21.27 million tonnes during the same period last year, representing an increase of 8%.

"Volume growth in the third quarter was below expectations, but satisfactory in a difficult market affected by a steep decline in the oil price," OW Bunker said.

Gross profit fell to USD 29.0 million (Q3 2013: USD 59.8 million), mainly driven by the unrealized risk management loss of USD 24.5 million, the company said. For the first nine months of 2014, gross profit was USD 143.7 million compared to USD 155.7 million during the corresponding period in 2013.

Gross profit per tonne fell to USD 3.62 (Q3 2013: USD 7.65 per tonne). Excluding the unrealized risk management loss, gross profit per tonne was USD 6.67 in Q3 2014. Gross profit per tonne for the first nine months was USD 6.28 against USD 7.32 in 2013. Excluding the unrealized risk management loss, gross profit per tonne for the January to September period was USD 7.35.

Profit before tax (EBT) before special items fell to USD -6.2 million (Q3 2013: USD 26.7 million). EBT before special items for the first nine months was USD 36.7 million, down from USD 56.5 million in 2013.

Profit for the period before special items and tax effect hereof was USD -5.8 million (Q3 2013: USD 20.7 million). For the first nine months, the figure was USD 27.6 million versus USD 44.0 million during the same period in 2013.

Return on equity before special items and tax effect hereof was -10% (Q3 2013: 34%). The figure was 15% for the first nine months, against 24% in 2013.

Commenting on the results, CEO Jim Pedersen remarked: "Overall the third quarter result was very disappointing. The fall in the oil price in particular in September was exceptional and led to a USD 24.5 million unrealized risk management loss. The margin pressure seen in the second quarter continued, but seems to have stabilised. We reduce our full-year volume forecast in a move to focus on higher margin business."

In its forecast for the full year, OW Bunker has reduced its expected full-year 2014 volume growth to around 6% compared to 2013, from its previous figure of 10% in a move to focus on higher margin business.

OW Bunker said its previous forecast on October 7 implied a full-year net profit before special items of approximately USD 55 million. This included a possible reduction of the risk management loss, assuming unchanged or higher oil prices. Excluding the possible reduction of the unrealized risk management loss, the company now expects net profit before special items to be around USD 44 million.