Oil majors Total and Royal Dutch Shell have beat analysts’ expectations by posting modest profits. Given the drastic drop in demand for oil since nations around the world initiated coronavirus lockdowns, the two firms had been expected to post losses.
Oil trading activities seem to be behind the better-than-expected results, with the energy companies having secured crude oil when prices were low and selling it later, when prices recovered to around $40 per barrel. This was indicated by Patrick Pouyanne, the Chief Executive of Total, in a statement:
“These results are driven in particular by the outperformance of trading activities, once again demonstrating the relevance of Total’s integrated model.”
The Chief Financial Officer at Shell, Jessica Uhl, also pointed to trade performance being exceptionally good. In addition to producing crude oil and refining it into fuels, petrochemicals, and base oils for lubricant products, Shell, BP, and Total also have extensive trading operations. This has enabled them to benefit from the volatility in the oil markets during the pandemic, which has gone someway to offsetting losses from oil production during the same period.
While Shell and Total have done well to avoid losses, their profits are down substantially, and the announced figures do not include the close to $25 billion in write-downs that the companies have made between them.
Shell announced adjusted earners of $638 million, a drop of 82%, while Total’s profits of $126 million were down 96%. Losses of $674 million and $400 million, respectively, had been predicted by analysts.