Shell, BP, and TotalEnergies earned more money last year by buying and selling gas, oil, and electricity than the four largest private energy traders. This is according to new estimates, which highlight the importance of this activity for their profits.
According to Bernstein Research, the European energy giants’ commodity trading units contributed $16.6bn last year in earnings before tax, depreciation, and amortisation. Total, on the other hand, reported $11.5bn and BP $8.4bn.
“Overall, [three European] major oil companies led the pack. . . We estimate that molecules and electrons will generate around $37bn by 2022,” said analysts Oswald Clint and Alex McColl in a recent research note.
The four largest private energy traders, Vitol Trafigura Mercuria Gunvor, made combined earnings of $34bn in energy trading last year.
The fallout from Russia’s war in Ukraine has impacted the energy markets, causing prices to soar for gas and oil.According to sources familiar with the situation, Vitol is the largest private energy trading company in the world. It made a record profit of nearly $15bn in 2022, which was equal to the earnings from the previous six years.
According to Bernstein data, Trafigura’s energy division made gross profits of $8.6bn. Gunvor and Mercuria, on the other hand, earned $5.4bn each.
The results are indicative of the trading activities of energy giants that are rarely discussed.
According to Berstein, Shell’s and BP’s respective trading activities will contribute 20 percent of the group’s ebitda by 2022.
The trading capability of the European oil majors is seen as a unique asset. However, they choose to not break down the financial contribution and instead make qualitative statements regarding performance.
BP said Tuesday that a “very solid” performance by its oil trading division and an “exceptional quarter” from its gas traders helped the company achieve a quarterly adjusted profit of $5bn.
Murray Auchincloss, BP’s chief financial officer, said the gas trading team made the “right call” on the falling price across the quarter. He refused to provide figures.
Analysts say Shell, BP, and Total do not want to reveal financial information for fear that they will be revealing too many details to private competitors. Some executives are also concerned that the market will not value trading profits enough due to the volatility of earnings.
Bernstein estimates that the $77bn in commodity-linked trading profits made by 10 of the world’s largest commodity traders last year was more than twice the average of $37bn for 2021-2022.
European oil majors often refer to their commodity trading expertise as being key to their ability, in the next 20 years, to transform from oil and gas producers to integrated energy providers. They may gradually be required to provide additional details about these activities.
Large oil and gas producers outside of Europe who lack trading capabilities want to buy or build some. ExxonMobil announced in February its intention to create an international trading division. The Abu Dhabi National Oil Company also held discussions with Gunvor regarding a potential investment.
Clint, McColl, and Nelson stated that “the buzz surrounding trading in the current uncertain price outlook for energy products has lead to a growing appetite for a portion of the profits.”