According to a report from oil major and lubricant producer Royal Dutch Shell, the company’s trading division doubled its earnings to $2.6 billion in 2020.
The last year has not been favourable for the oil industry, with the various lockdowns and restrictions around the world leading to a slump in the demand for oil. The oil price even briefly turned negative as storage became scarce. Shell itself experienced a 28% fall in oil sales, with it dropping to an average of 4.71 million barrels per day (bpd).
The rise in trading income, however, has helped the company to mitigate the economic effects of the pandemic. Indeed, some 43% of the $5.995 billion made by its oil products division was due to trading, where it leverages its immense trading, refining and retail operations to benefit from short-term fluctuations in the global supply and demand of oil.
Shell is not alone in this, either. Reuters reports of having seen an internal presentation from rival oil major BP, which makes Castrol grease and other lubricants, that says its trading arm made nearly $4 billion in 2020.
While trading seems to have saved both companies from posting quarterly losses, investors seem more focussed on their strategies for transitioning to more renewables, which remain to be proven. Nevertheless, despite executives playing it down, Shell and BP are among the world’s biggest traders of commodities, and they move much more oil and derived products around the world than they produce – more than 20 million bpd on average.