Exxon Mobil's effort to build an energy trading business to compete with those of European oil majors unraveled quickly last year as the firm slashed the unit’s funding amid broader spending cuts, 10 people familiar with the matter have said.
The cuts left Exxon traders without the capital they needed to take full advantage of the volatile oil market, these people said. The coronavirus pandemic sent prices to historic lows — with U.S. oil trading below zero at one point — before a strong rebound. That created an immense profit opportunity for trading operations willing to take on the risk.
Exxon instead systematically avoided risk by pulling most of the capital needed for speculative trades, subjecting most trades to high-level management review, and limiting some traders to working only with longtime Exxon customers, according to interviews with 10 former employees and people familiar with Exxon's trading operation. Traders were restricted to mostly routine deals intended as a hedge for Exxon’s more traditional crude and fuel sales rather than gambles seeking to maximize profit, four of the people said.
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