BP Enjoyed Its Best Year in Oil and Gas Trading Since 2009

(Bloomberg) --

BP Plc enjoyed its best year trading oil and natural gas since 2009, helping the company weather the impact of lower energy prices and weak refining and chemical margins.

The oil major runs one of the world’s most sophisticated trading businesses -- which dwarfs independent commodity merchants -- complementing its oil fields, massive refineries and a huge network of filling stations. Competitor Royal Dutch Shell Plc said last week it enjoyed “one of the strongest years in recent memory” trading natural gas in 2019, with refined oil products also doing well.

“For our trading business volatility is kind of crucial in terms of how we structure that business,” BP Chief Financial Officer Brian Gilvary said in an interview. The last time the business performed this well was in the wake of the global financial crisis a decade ago when volatile energy prices helped physical traders rake in money.

Although Brent crude, the world’s most important benchmark, traded in a relatively narrow range of $52.51 to $75.60 a barrel last year, at times it surged rapidly, only to crash as quickly, as pipeline outages and attacks on Saudi Arabia’s energy facilities upended the market.

BP doesn’t disclose earnings of its trading unit and Gilvary declined to provide any details. Insiders say a good year brings in at least a couple of billion dollars in profitability. In its quarterly statement on Tuesday, BP simply said it benefited from “higher contribution from supply and trading” in oil and from “strong gas marketing and trading results.”

Last year was one of the best ever for energy trading across the industry. Besides conflicts flaring up in the Middle East, dramatic changes in ship-fuel regulations made fuel oil a cash cow and earned Shell $1 billion last year to mid-November. The so-called IMO 2020 rules shook up the refining and maritime industries and caused gyrations in the price of diesel.

BP trades the equivalent of 11 million barrels a day, far more than any independent energy trader. Vitol Group, the top trading house among the independents, bought and sold almost 7.5 million barrels a day in 2018.

To contact the reporters on this story: Javier Blas in London at jblas3@bloomberg.net;Laura Hurst in London at lhurst3@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net, Rakteem Katakey, Amanda Jordan

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