BP on Tuesday became thefirst oil major to detail how wild swings in U.S. crude priceshad first boosted – and then dented – its profit last year amida shale revolution that has transformed markets in the UnitedStates.

The firm said in its full-year results that its supply andtrading division enjoyed a very strong start to the year, butsuffered in the final quarter after the value of crudes in theGulf of Mexico were hammered by rising production making its wayto the region.

Speaking on a fourth quarter results call, Chief FinancialOfficer Brian Gilvary said the firm had seen supply and tradingresults fall in the fourth quarter due to Gulf of Mexico crudespricing well below international market North Sea Brent.

“If our Gulf of Mexico barrels stay disconnected from Brentwe may start to have some impact,” Gilvary said.

“Those barrels have been pricing off local prices, like WTI(West Texas Intermediate).”

The trading community has typically described the first halfof 2013 as a big success story when bets that the spread betweenthe European benchmark Brent and U.S. benchmark WTI would narrow, paid out hugely.

Spread betting has become one of the mostpopular games in oil trading in the past years but its brutalvolatility has given it a deadly reputation.

In 2011 traders saw a bonanza, when they bet on the steepwidening of the spread as the United States started to face anoil glut from rising shale oil production, which becamelandlocked in the U.S. Midwest.

This year, new pipelines carried oil away from the pricinghub in Cushing, Oklahoma, easing the glut there and rapidlynarrowing the spread from as much as $23 in February to parityin July. Some commodity hedge funds reported double digit gains.

But for traders betting this trend would continue, it hasgone spectacularly wrong since September. U.S. oil stocks haveunexpectedly built up, making U.S. crude much cheaper than Brentagain. By the end of 2013, the spread was the biggest it hasbeen for eight months at more than $19.

Prices on the U.S. Gulf Coast, where BP has a largepercentage of its North American output, also began to fallrelative to Brent as the glut of crude was shifted south.

“You will have seen that grades like Mars have beendiscounted quite heavily to Brent … as you have seen thedomestic crude rebalance in the United States,” Gilvary said.

CEO Bob Dudley described the company’s Gulf of Mexicoproduction as “a natural hedge” for its massive Whitingrefinery, which has undergone a multi-billion dollar overhaul inthe past year to process cheaper Canadian tar sands crude.

BP’s Whiting refinery was one of the most closely watched bythose trading the Brent-WTI spread last year, due to its sizeand direct-link to the Cushing, Oklahoma delivery hub via theBP1 pipeline.

Cushing is the delivery and pricing point for U.S. crude oilfutures, and inventory levels at the hub help determine pricesof the benchmark U.S. contract.

The last time BP disclosed figures for trading, in 2005, itearned $2.97 billion, or over a tenth of the firm’s overall netprofit.
Source: Reuters