Equinor raises energy trading forecast on volatility, flexibility

FILE PHOTO: Equinor's flag flutters next to the company's headqurters in Stavanger

By Nora Buli

LONDON (Reuters) - Norway's Equinor raised its energy trading division's outlook on Wednesday, saying it expects the business to profit from a more flexible asset portfolio and market volatility.

Equinor earlier posted record overall profits for 2022, driven by soaring gas prices, sending its shares up 7%.

It lifted the adjusted quarterly earnings guidance for its Marketing, Midstream and Processing (MMP) segment to $400 million-$800 million, from $250 million-$500 million previously.

"It's important that we believe that the markets will be volatile because if they're not volatile, there's less money to be made," Irene Rummelhoff, the head of MMP told Reuters.

Equinor also benefits from having a flexible oil and gas production portfolio and different options for where and when to send its production, she added.

Gas produced in Norway is sent through a vast pipeline system below the North Sea, with exit points in Britain, Germany, France, Belgium and recently also Poland via Denmark, allowing Equinor to deliver to the highest priced market.

Europe's benchmark TTF front-month wholesale gas contract hit a record 343.08 euros per megawatt hour (MWh) in August, but has since fallen to around 60 euros/MWh thanks to a mild winter and supplies of liquefied natural gas (LNG).

However, there was substantial variation in prices between different regions of Europe.

Last year's volatility was extreme and Equinor did not expect to see the same geographical spreads, Rummelhoff said.

Using algorithmic trading makes it possible to buy and sell even on small market moves, and doing so many times over meant even incremental changes added up, she said.

Equinor is also flexible on when it delivers gas, both by having access to storage and as it can steer its upstream production, Rummelhoff said, adding this was "rather unique" and had the same effect as "free gas storage".

(Editing by Victoria Klesty and Alexander Smith)