November 2, 2023 [Reuters]- Energy giants offered a rare glimpse into their liquefied natural gas (LNG) trading strategies in recent days, with Shell’s and TotalEnergies’ bets on rising Asian demand paying off while BP’s bet on a European deficit turned sour.
The contrasting outcomes highlight the risky nature of trading divisions, at times notching up spectacular profits as traders quickly exploit price swings and supply and demand disruptions around the world to make money, but at other times losses have been just as spectacular.
Companies rarely reveal details on their trading activities beyond general commentary on their performance, but executives this week shed some light on their performance in the third quarter.
Shell (SHEL.L) and TotalEnergies(TTEF.PA) successfully bet on rising Asian demand for LNG ahead of winter, resulting in strong earnings from trading. BP’s (BP.L) focus on Atlantic basin markets, where demand was muted due to full inventories, led to a sharp drop in trading profits.
BP’s third quarter profits of $3.3 billion missed analysts’ forecasts by around 20%, partly accounted for by poor LNG trading results.
“Gas trading was exceptional in the first quarter, exceptional in the second quarter and had a weak quarter in the third quarter. That’s just from a lack of structure inside the markets,” BP interim CEO Murray Auchincloss told Reuters.
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