Energy trading has become for BP, British oil super major, a shifting strategy amid the economic crisis that hit the energy industry after the pandemic. According to Reuters, BP made almost $4 billion in revenue from its energy trading arm in 2020, almost the same as the year before.
Firstly, the news agency reported BP’s energy trading earnings after a private presentation of the company; to which it had access, although it is not an official or confirmed figure, company’s officials have confirmed in the past that energy trading shielded them from the covid-19 impact.
Secondly, the revenue from this business unit helped BP and others, like rival Shell, to finance their energy transition strategy to be less dependent on oil. However, even with high-record trading earning BP posted a $20,3 billion loss in 2020.
Thirdly, BP has committed itself to cut its oil and gas output and to shift towards a diversified portfolio. Just in December 2020, the company acquired a majority stake in Finite Carbon; one of the biggest carbon offset firms in the United States.
Indeed, BP is not the only oil company looking for a rise in carbon credit prices; Shell and other major oil companies are going towards offsetting carbon solutions; to counter the fall of fossil fuels and align better to an environmental agenda.
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Integrated energy trading, key strategy for return of investment
On the other hand, according to Reuters, one of the biggest trading strategies in 2020 was to buyout oil stocks during the prices plunge; and then re-sell it when prices got stable again. “BP made around $1.7 billion on this strategy alone in the second quarter of 2020; according to the presentation.” Says Reuters.
In addition, for the third and fourth quarter of the year, the company made only $250 million out of this strategy.
However, in August; company’s Chief Financial Officer Murray Auchincloss told analysts that during the second quarter of 2020 the business had been “exceptionally strong from oil trading”.
Finally, “we think the power of integration from our trading organization is awfully good,” he added. Remarking that BP would also secure returns of investment on “double digits” out of their integrated trading business of oil; also, power, natural gas and solar energy.
