How Big Oil Is Profiting From the Slump

(Bloomberg) — Europe’s largest oil companies are gaining support from an unlikely source as they confront the industry’s worst slump since the financial crisis: lower oil prices. Although better known for their oil fields, refineries, and petrol stations, BP Plc, Royal Dutch Shell Plc and Total SA are also the world’s biggest oil traders, handling enough crude and refined products every day to meet the consumption of Japan, India, Germany, France, Italy, Spain and the Netherlands. The trio’s sway in commodities trading, largely unknown outside the industry, is set to pay off in 2015 as the bear market allows traders to generate higher returns by storing cheap oil today to sell at higher prices later and using lower prices to make more bets with the same capital. “Volatility has increased dramatically over the last three or four months,” said Mike Conway, the head of Shell’s trading and supply business. “Parts of your business that are volatility driven are probably doing pretty well.” While companies are shy about revealing the financial results from their trading business, a look at the last major bear market provides clues to the opportunity they have today. In the first quarter of 2009, BP said it … continue reading

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