BP Reports Significant Oil Trading Profit Amid Rising Energy Prices

BP Oil Trading Performance Exceptional in Q1 Amid Iran War-Driven Price Surge

BP Plc reported an exceptional oil trading performance in the first quarter, capitalizing on the volatility and price surges caused by the ongoing Iran war. The conflict has led to a significant increase in oil, gas, and fuel prices, with Brent crude rising by more than 60% this year.

The war has disrupted shipping through the crucial Strait of Hormuz, causing a near-halt in oil and gas shipments. Iran has targeted key energy infrastructure in the Persian Gulf in retaliation for US-Israeli attacks. As a result, the UK energy giant's traders were able to profit from the price surges, despite the company's natural gas trading results being described as "average."

Shell Plc also reported a strong result from its oil traders last week, while US rivals Exxon Corp. and Chevron Corp. disclosed combined mark-to-market derivative losses of about $7 billion. These losses were due to the companies being forced to post paper losses on hedges associated with cargoes that will take several weeks to be delivered.

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BP shares edged lower in early London trading, along with European peers, as oil prices fell on signs that the US and Iran may revive peace talks after the start of an American blockade of ships transiting to and from Iranian ports.

BP's asset exposure in the Middle East is low compared to its peers, primarily through joint ventures in Iraq and the United Arab Emirates. The company's oil production was down slightly compared to the fourth-quarter, while the UAE and other Gulf producers have been forced to halt some production of oil, gas, and refined products.

BP is a core partner in the giant Rumaila field in the south near the Persian Gulf, producing more than 1.4 million barrels per day in 2024. The company acts as a contractor in the field rather than holding ownership interest.

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Barclays Plc analyst Lydia Rainforth lowered her first-quarter operating profit estimate due to BP's oil production decline, adding that a lag in passing through higher prices means benefits will be felt in the second quarter. She also highlighted stronger downstream performance.

BP's refining margins improved by $1.70 per barrel from the previous quarter, implying a roughly $935 million uplift for the company this year. This is based on the company's rule of thumb that every $1 increase in refining margins will add $550 million to pre-tax operating profit in 2026.

Net debt is expected to rise to a range of $25 billion to $27 billion, excluding hybrid bonds and lease obligations, BP said. This is an increase from $22.2 billion at the end of 2025, driven primarily by a significant working capital build in the range of $4 billion to $7 billion, largely due to the higher price environment.

The report is BP's first guidance since Chief Executive Officer Meg O'Neill took over on April 1, with a mission to make the company leaner, focus on oil and gas production growth, and divest low-return clean energy assets. She replaced Murray Auchincloss, ousted last year by new Chairman Albert Manifold, who said changes weren't happening fast enough.

The rise in net debt complicates BP's turnaround targets, with the company aiming to rein in net debt to a range of $14 billion to $18 billion by the end of 2027. In February, BP halted its share buybacks and withdrew its guidance of returning 30% to 40% of operating cash flow to shareholders in an effort to shore up the balance sheet.