BP is heading into its latest results expecting “exceptional” earnings from its oil trading operation, as upheaval in energy markets created by the US-Israeli war on Iran lifts trading opportunities across the sector.
The company is seen as benefiting from a sharp rise in market volatility after Tehran’s effective closure of the strategically important Strait of Hormuz shipping route. The disruption has helped create the kind of choppy conditions that can generate windfalls for trading desks able to navigate fast-moving price swings.
Analysts at Citi have responded by lifting their profit forecast for BP by 20%, to $2.6bn for the January to March period. That upgrade comes despite expectations that oil and gas production was flat over the quarter.
The outlook underlines how a company’s trading arm can sometimes outperform its core production business when markets are unsettled. In BP’s case, the combination of conflict-driven uncertainty and tight shipping conditions has created a more favourable environment for trading profits than for traditional upstream output.
Energy traders across the industry are now dealing with heightened uncertainty as the situation in the region continues to affect supply routes and pricing. The closure of the Strait of Hormuz, through which a large share of global oil shipments passes, has added to concerns about supply disruption and price instability.
For BP, the expected boost from trading is likely to feature prominently when the company reports results, especially as investors look for signs of how well major energy groups are positioned to benefit from turbulent markets. Even with production standing still, stronger trading performance can materially improve the overall earnings picture.
The forecast increase from Citi reflects the view that volatility itself has become a source of profit for some of the biggest players in the oil market. As prices have risen and shipping risks have intensified, BP appears to be among the companies poised to gain from the upheaval.
The latest estimate suggests that first-quarter earnings could be significantly ahead of earlier expectations, driven less by output and more by the company’s ability to capitalise on the market conditions surrounding the conflict.
