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Gazprom has made deep cuts to its London-headquartered trading business, in an early sign of the Russian gas giant's attempts to adjust to continued weakness in commodity markets.

Gazprom Marketing & Trading, a subsidiary of Gazprom Group, has cut staff numbers by around 20%, including at least six directors, two people familiar with the matter said.

The unit anticipates a massive fall in some of its divisions' profits this year, which come from trading oil, gas and other commodities, these people said.

Like other energy majors, Gazprom has been hit by weak oil and gas prices, but the company is also battling increased competition in its east European backyard.

The London cost cuts offer a rare glimpse into changes at an opaque company that analysts say has been slow to adapt to current conditions.

Up to 170 people in London will go—a fraction of the majority state-owned group's 462,400 employees. But analysts expect the company will need more adjustment.

The cuts to trading may also be a blow to Gazprom's attempts to diversify away from its traditional pipeline gas exports.

"Gazprom is now adapting to the new world and the new world is lower costs everywhere," said Thierry Bros, senior research fellow at the Oxford Institute for Energy Studies.

The staff reductions follow a review by consultancy Oliver Wyman, which was asked to look for cost savings, the people familiar with the matter said. Both Oliver Wyman and Gazprom declined to comment.

"Selling gas in Europe may not be as profitable as people were thinking, with prices lower, you have to reduce costs everywhere so you have to move into a low-cost business model," Mr. Bros said.

A fall in the ruble has cushioned declines in dollar-denominated oil and gas for Gazprom. But the price of energy has plummeted since 2014. Gazprom's profits fell 17% to 245 billion rubles in the second quarter this year and 5% in the first quarter of the year.

Some of the world's largest energy companies have initiated big cuts in recent years.

Royal Dutch Shell PLC, the world's second largest gas producer after Gazprom, has cut at least 12,500 staff since 2015—it now has 94,000 employees, according to its website.

In January, BP PLC said it would slash about one-sixth of its 24,000 exploration and production staff and other major oil companies have cut in their workforce.

While Gazprom is exporting gas at record levels, and that resource remains plentiful, the company is facing increased competition in Eastern Europe.

In recent years, big customers like Poland and Lithuania have set up gas import terminals to reduce their dependence on gas piped in from Russia. That boosts their negotiating power with the company, which was forced to cut prices and reduces Moscow's leverage at a time of geopolitical tension.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Laura Mills at Laura.Mills@wsj.com

(END) Dow Jones Newswires

November 18, 2016 11:25 ET (16:25 GMT)

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