(Reuters) - The oil price crash has meant slashed budgets, staff layoffs and mothballed projects for big producers, but oil traders will celebrate their best market for years this week.

As hundreds of dealers flock to London for the annual International Petroleum Week, cocktail circuit talk will be of the chance of huge returns after years of low volatility.

For them the market presents near perfect conditions, mimicking the year after the 2008 oil crash when some booked their best profits in history. Then, those with the know-how and storage were able to lock-up millions of barrels of crude until prices eventually recovered.

The bumper profits on offer are reflected in the long list of IP Week parties, with no firms cancelling their events this year, even as they make cuts in other areas.

"I haven’t been more positive about trading conditions since 2009," said Torbjorn Tornqvist, head of trading house Gunvor, one of the world's largest independent oil dealers, told Reuters.

"I see contango in the market, I see the cost of funding going down, I see the dollar strengthening, I see strong refining margins."

Contango - industry jargon for when prices for delivery months in the future are higher than in the spot market - is key to much of the trading boom.

Any trader with access to storage, on land or at sea, can buy a barrel of oil today for $58 LCOc1 and sell it 10 months down the line for $65 LCOZ5, based on current prices.

Volatility has also jumped in recent weeks. After posting a 60 percent crash from above $115 a barrel June to near $45 in January, Brent crude oil has rallied by as much as 30 percent, touching $59 a barrel this week.

Prices have swung wildly, gaining as much as 9 percent in one session only to fall 5 percent the next, as traders wrestle over whether a price floor has really been hit, even as supplies look to continue outstripping demand in the first half of this year.


Gunvor and its rivals Glencore, Vitol, Mercuria and Trafigura have seen profits falling in the past five years versus the peak of 2009, although the amount of oil, coal, and gas they move has grown rapidly.

While revenues can amount to more than $300 billion a year for the biggest trader Vitol, profit-margins are razor thin, shrinking to less than 1 percent even in the better years.

"Whoever has storage this year will win," the head of Mercuria, Marco Dunand, told Reuters last month. "Not necessarily traders - but oil companies too and even refiners."

Oil majors BP (BP.L) and Shell (RDSa.L), which have the biggest trading operations among international energy firms, have both reported improved results from trading divisions over the past week as part of their fourth quarter results.

"Since 2009, when a lot of oil was stored onshore and offshore, a lot of new storage capacity has been built and a lot of refineries were turned into storage," said Dunand.

Dunand estimates that by the end of the first quarter of 2015 some 400 million barrels of oil worth $22 billion will be stored onshore and offshore as global production volumes are still massively exceeding demand.

However, as storage is being gradually filled in Europe more and more barrels will be sent to the United States where storage capacity is still abundant, meaning potentially record profits for traders with a large presence there.

"There is a lot of spare capacity in the U.S. and some geographical rebalancing still remains to be done," said Dunand.

(Additional reporting by David Sheppard, editing by William Hardy)