Shell doubled its crude and refined products trading profits in 2020 from 2019, with its trading offsetting some of the negative effects of the collapse in refining margins and fuel demand during the pandemic.
Shell’s detailed annual report for 2020 showed that its trading and supply segment was a large contributor to the oil products division, with earnings rising to nearly $2.6 billion, double the $1.3 billion of trading and supply earnings for 2019.
Total earnings in the oil products division were down to $5.995 billion in 2020, excluding net charges of almost $6.5 billion, compared with $6.231 billion in earnings in 2019. Trading & Supply accounted for 43 percent of the $5.995 billion earnings in the division last year, or $2.58 billion. To compare, trading and supply represented 21 per cent of the 2019 earnings of $6.231 billion, bringing in $1.3 billion in the last ‘normal year’ before the pandemic.
The increased earnings from crude and refined products trading helped to some extent to mitigate the impact of the low oil prices, low refinery utilization, and low fuel demand last year.
Shell’s profits plunged by 87 percent in 2020, yet the supermajor managed to stay in the black, unlike BP or ExxonMobil.
BP is also benefiting from its trading operations. The UK-based supermajor likely sees its return on average capital employed in its large oil trading business at around $2.5 billion annually, according to Bloomberg’s estimates from September based on the company’s recent capital markets disclosures.
BP, like most of the other Big Oil companies, doesn’t disclose how much its oil trading unit makes or how profitable those operations are.
Europe’s oil and gas supermajors such as BP, Shell, and Total have vast oil trading operations and often trade more volumes of crude oil than the biggest independent commodity traders such as Trafigura, Vitol, or Glencore.