Oil market structure eroded Shell's trading profit
* Low volatility limited trading profit across the industry * Shell trading profits in 2010 before previous two years
* Shell trading has never made an annual loss
LONDON, Feb 3 (Reuters) - A lack of volatility and an unfavourable structure in the oil market cut the 2010 trading profits of Royal Dutch Shell (RDSa.L), its chief financial officer said on Thursday as it posted disappointing results. [ID:nLDE71209F]
Shell did not disclose its trading profit, but CFO Simon Henry told a conference call that the earnings from trading across a range of commodities from oil to petrochemicals were lower than during the two previous years "due to the market itself".
"Nobody made a lot of money in trading last year," he added, although adding Shell still made a trading profit in every quarter of the year and has never made an annual trading loss.
Oil prices CLc1 LCOc1 spent much of last year in a range between roughly $70 and $90 a barrel.
Henry described that as "a small fraction of the volatility in 2008 and 2009". Prices shot to their all-time high of nearly $150 a barrel in July 2008 and then crashed to just above $30 in December 2008.
On Tuesday, rival BP Plc (BP.L) also blamed a lack of volatility for reduced trading profits. [ID:nLDE71014S]
The market structure in 2010 was mostly one of contango, meaning that prompt prices were cheaper than those for later delivery, albeit a much shallower contango than in 2009, which had allowed oil traders to profit.
Late in 2010, European Brent crude flipped into the opposite structure -- backwardation.
Both Shell and BP made big profits from trading in 2009 as the contango structure enabled them to buy cheap oil, store it and sell it later at a higher price. (Reporting by Alex Lawler and Barbara Lewis; Editing by Jane Baird)
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