It was a bleak moment for the oil industry. U.S. shale companies were failing by the dozen. Petrostates were on the brink of bankruptcy. Texas roughnecks and Kuwaiti princes alike had watched helplessly for months
as the commodity that was their lifeblood tumbled to prices that had until recently seemed unthinkable. Below $50 a barrel, then below $40, then
But inside the central London headquarters of one of the world’s largest oil companies, there was an air of calm. It was January 2016. Bob Dudley had been at the helm of BP Plc for six years. He ought to have had as much
reason to panic as anyone in the rest of his industry. The unflashy American had been predicting lower prices for months. He was being proved right, though that was hardly a reason to celebrate.
Unlike most of his peers, Dudley was no passive observer. At the heart of BP, far removed from the sprawling network of oil fields, refineries, and service stations that the company is known for, sits a vast trading unit,
combining the logistical prowess of an air traffic control center with the master-of-the-universe swagger of a macro hedge fund. And, unknown to all but a few company insiders, BP’s traders had spotted, in the teeth of the oil price collapse, an opportunity.
Over the course of 2015, Dudley had acquired a reputation as the oil
industry’s Cassandra. Oil prices had been under pressure ever since Saudi Arabia launched a price war against U.S. shale producers a year earlier.
When crude prices started falling, he confidently predicted they would
remain “lower for longer.” A few months later, he went further. Oil prices, he said, were due to stay “lower for even longer.”
On Jan. 20, 2016, the price of Brent crude oil plunged to $27.10 a barrel, the lowest in more than a decade. It was a nadir that would be reached again only in March 2020, when the Saudis launched another price war,
this time targeting Russia, just as the coronavirus pandemic sapped global demand.
When Dudley arrived in the Swiss ski resort of Davos for the World Economic Forum on Jan. 21, 2016, the industry was braced for more doom and gloom. Wearing a dark suit and blue tie, the BP chief executive officer made his way through the snowy streets. After one meeting, he was asked—as usual—for his oil forecast by a gaggle of journalists. “Prices will remain low for longer,” he said. This time, though, his by-then-well-known mantra came with a kicker: “But not forever.”
Few understood the special significance of his comment. After months of slumping oil prices, BP’s traders had turned bullish. And, in complete
secrecy, the company was putting money behind its conviction.