UPDATE 1-BP unwinding oil storage play as contango narrows

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LONDON, April 28 (Reuters) - Oil major BP said itwill gradually sell throughout 2015 more than $1.25 billion ofoil it had stored earlier this year to seize on a futures marketstructure to boost profit.

Traders including BP bought and stored oil throughout late2014 and early 2015 after an oil price collapse as prompt pricesdropped below those for further into the future, a marketstructure known as contango.

Traders have been profiting from the contango by storingcrude in the hope of reselling it at a profit at a later date orby simply locking gains via paper trading.

Chief Financial Officer Brian Gilvary said BP's trading unithad performed much better than in an average quarter, likeningthe quarter to a strong trading performance in early 2009 whencrude prices last crashed.

"The profit we booked in one quarter for contango isrelatively modest, in the tens of millions, certainly not thehundreds," BP's Chief Financial Officer Brian Gilvary said on aconference call.

BP bought and stored more than $1.25 billion worth of oil,the equivalent of around 23 million barrels, during the firstthree months of the year, the company said.

BP said it will gradually unwind the stocks as the marketstructure narrowed.

"We expect the working capital inventory build to unwindover the rest of the year," a company spokesman said.

Although the volumes are large, they are still below thoseaccumulated by some of the world's biggest trading houses duringthe first quarter. Since March the market structure has narrowedsignificantly, making a repeat of the storage play unlikely inthe second quarter.

BP and Total both reported higher than expectedprofits on Tuesday thanks to steep increases in profits fromrefining, showing the resilience of global oil firms in the faceof slumping oil prices.

Many trading houses, such as Glencore andTrafigura, have said since March that although inlandor onshore crude storage was still profitable, offshore storageat sea was probably out of question due to higher costsassociated with shipping fees traders have to pay to tankerowners. (Writing by Ron Bousso, additional reporting by Karolin Schapsand Dmitry Zhdannikov, editing by David Evans)