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Investors had already been warned that the pandemic hammered almost all parts of the energy giants\u2019 businesses \u2014 from forecourts, to oil and gas production, to the long-term value of assets. But that was offset by gains from speculating on energy markets, the companies said Thursday.<\/p>\n
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In keeping with tradition, Shell and Total didn\u2019t disclose exactly how much money their trading operations made, but acknowledged they were able to exploit extreme price volatility during April\u2019s record supply glut.<\/p>\n
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The quarter was \u201cthe best on record\u201d for Shell\u2019s trading unit, Chief Financial Officer Jessica Uhl said on a call with reporters. \u201cIt was a really outstanding performance.\u201d<\/p>\n
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When asked by investors on a separate call about how much money the traders made, Total CEO Patrick Pouyanne responded: \u201cThe oil trading is a secret.\u201d He would only say it made about $500 million more than usual, but refused to disclose what\u2019s the normal baseline.<\/p>\n
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Shell took advantage of its sprawling infrastructure that allowed it to capitalize on the market\u2019s volatility \u2014 from storing oil cheaply to adapting its refineries to meet changes in demand. Shell benefited from \u201call sorts of arbitrages that opened up in unusual parts of the world,\u201d Chief Executive Officer Ben van Beurden said in a Bloomberg Television interview.<\/p>\n
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U.S. Difference<\/strong><\/p>\n <\/p>\n With trading floors that resemble the operations of Wall Street banks in cities from London to Singapore, the European majors have an edge over their main American rivals, which market their own energy production but largely eschew pure trading as a means of generating profits. That means that Exxon Mobil Corp. and Chevron Corp., which publish results on Friday, are unlikely to report a similar boost in the second quarter.<\/p>\n <\/p>\n Shell\u2019s adjusted net income was $638 million in the second quarter, down 82% from the same period a year earlier but far better than the average analyst estimate of a $664 million loss. Total posted a surprise profit of $126 million, compared with expectations for a loss of $443 million.<\/p>\n <\/p>\n Those figures exclude tens of billions of dollars of writedowns on the value of the companies\u2019 assets resulting from the slump in oil and gas prices, which had already been disclosed to investors.<\/p>\n <\/p>\n Shell\u2019s B shares fell 5.7% to 1,113.8 pence as of 4:55 p.m. in London. Total fell 1.6% to 31.93 euros in Paris.<\/p>\n <\/p>\n Contango Trade<\/strong><\/p>\n <\/p>\n When oil prices plunged last quarter, traders were able to buy crude on the cheap, store it and lock in a profit from the future sale by selling forward in the derivatives market. The profit was possible because spot prices were much lower than forward prices, a situation known as contango.<\/p>\n <\/p>\n With its vast access to data from its shipping network, its refining positions and high flow of trades, Shell was able to capitalize on the market structure more extensively than the average trader, finding contango plays in more obscure non-benchmark crudes.<\/p>\n <\/p>\n \u201cWe do contango on steroids,\u201d Van Beurden told analysts in a call.<\/p>\n <\/p>\n It\u2019s unlikely that profits from trading will remain at the same level during the rest of the year, since the contango has since diminished significantly and market volatility has eased.<\/p>\n <\/p>\n Shell\u2019s \u201cvery strong trading and optimization performance that we saw in the second quarter is not necessarily an indication for the third quarter,\u201d CFO Uhl said. While she wouldn\u2019t disclose how much money the company\u2019s traders made, there were some clues in its statement.<\/p>\n <\/p>\n Shell\u2019s entire refining and trading business delivered adjusted net income of $1.5 billion in the period, more than 20 times larger than a year earlier. Considering that the part of Shell\u2019s business that actually manufactures fuel suffered one of its worst-ever quarters, with low margins and sales volumes, it\u2019s possible that the bulk of those earnings came from trading.<\/p>\n gCaptain<\/p>\n","protected":false},"excerpt":{"rendered":" Investors had already been warned that the pandemic hammered almost all parts of the energy giants\u2019 businesses \u2014 from forecourts, to oil and gas production, to the long-term value of assets. But that was offset by gains from speculating on energy markets, the companies said Thursday. In keeping with tradition, Shell and Total didn\u2019t disclose …<\/p>\n","protected":false},"author":1,"featured_media":14627,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[56],"tags":[9577,166,496,9578,1163,1982,1187],"class_list":["post-14626","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-marine-world","tag-bonanza","tag-oil","tag-quarter","tag-saved","tag-shell","tag-total","tag-trading"],"_links":{"self":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts\/14626","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/comments?post=14626"}],"version-history":[{"count":0,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts\/14626\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/media\/14627"}],"wp:attachment":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/media?parent=14626"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/categories?post=14626"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/tags?post=14626"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}