According to data from
the Economist, State-owned oil companies (State Oil) such as UAE’s
ADNOC,
Saudi Aramco,
pdvsa of Venezuela and
Qatar Energy have roughly two-thirds of the remaining reserves of discovered oil and gas globally and produce three-fifths of the world’s crude and half its natural gas. Large international oil majors (Big Oil) such as BP and its rivals Royal Dutch Shell Plc and Total SE on the other hand produce one tenth of the world’s crude and natural gas (the rest is pumped by smaller independent companies) but they’re also some of the world’s largest commodity futures traders and see it as the heart of their business. Together the three companies trade almost 30 million barrels a day of oil and other petroleum products, equal to the daily production of the entire OPEC cartel. Shell alone trades about 12 million barrels a day. That’s physical trading. The paper volumes in financial trading are much larger. Trading also gives them an edge over their U.S. rivals, Exxon Mobil Corp. and Chevron Corp., which for historical and cultural reasons have eschewed trading.
While Big Oil does trade in physical energy markets, buying tankers of crude, gasoline, diesel, natural gas and power markets via pipelines and electricity grids, they also speculate in financial markets, buying and selling futures, options and closing deals with hedge funds, private equity firms, and investment banks.
Shell is by far the world’s largest oil trader, ahead of Commodity Trading Companies such as Vitol Group and Glencore Plc and makes as much as $4 billion in pretax profit from trading oil and gas; BP between $2 billion to $3 billion annually roughly half of the company’s upstream business of producing oil and gas; the French major Total not much less, according to people familiar with the three companies. In years of low oil prices, like 2016 or 2020, trading profits can far exceed those of the production business.
