Shell, Total avoided expected loss due to trading

London - The trading units of European oil and gas majors have shielded their second-quarter results from the full force of the corona-induced collapse in demand for fuel, but big writedowns showed the scale of the challenge ahead, results showed on Thursday. France's Total and Anglo-Dutch Royal Dutch Shell scraped out small profits against expectations of losses

di Shadia Nasralla and Ron Bousso

London - The trading units of European oil and gas majors have shielded their second-quarter results from the full force of the corona-induced collapse in demand for fuel, but big writedowns showed the scale of the challenge ahead, results showed on Thursday. France's Total and Anglo-Dutch Royal Dutch Shell scraped out small profits against expectations of losses with the help of the trading units which can exploit market gyrations even when prices fall: "These results are driven in particular by the outperformance of trading activities, once again demonstrating the relevance of Total's integrated model," Total Chief Executive Patrick Pouyanne said in a statement.

Earnings of $1.5 billion at Shell's trading unit in the quarter was about 30 times higher than a year ago. This mirrored Equinor's results last week, where trading helped the Norwegian company avoid an operating loss. Oil prices plunged below $16 a barrel in April from above $60 at the start of the year, as daily global crude consumption plunged by as much as a third. Prices have regained some ground since then to trade above $40. Eni's refining and marketing unit's second-quarter profit shot up by 76% to $139 million compared with a year ago, although the company overall still swung to a loss, it said on Thursday. But trading earnings have not protected the companies from the gloomier longer term prospects for demand.

The pandemic has prompted energy firms to slash long-term crude price outlooks, cutting the value of their assets. France's Total wrote down $8 billion in the quarter, while Shell cut the value of its assets by $16.8 billion. Eni wrote down 3.5 billion euros ($4.1 billion) and BP, due to report second-quarter results on Aug. 4, has guided for a $17.5 billion hit. Shell responded to the pandemic by cutting its dividend for the first time since World War Two and lowering planned spending this year by $5 billion to a maximum of $20 billion. Eni cut its dividend and introduced a new dividend policy based on the oil price. Equinor also cut its dividend and suspended a share buyback. BP and Total have not cut their dividends. U.S. oil and gas majors Chevron and Exxon are due to report on July 31.

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