BP has announced that it expects 'exceptional' earnings from its oil trading desk in the first quarter of its financial year, benefiting from volatile energy markets triggered by the US-Israeli war on Iran. According to multiple reports, the company's refining margins have strengthened, and its oil trading results are anticipated to be significantly higher than usual.
Key Takeaways
BP expects 'exceptional' earnings from its oil trading desk due to volatility caused by the US-Israeli war on Iran. The company's refining margins have strengthened, and analysts have upgraded profit forecasts. Brent crude prices have risen sharply but dipped slightly on Tuesday.
The conflict has caused significant market volatility, particularly after Tehran effectively closed the key Strait of Hormuz shipping route. BP reported that its refining margins rose to $16.9 a barrel in the first quarter from $15.2 a barrel in the previous three months, which is expected to boost earnings from refined products by $100 million to $200 million.
Analysts have been upgrading their profit forecasts for BP. Citi raised its estimate for BP by 20% to $2.6 billion adjusted net income in the January-to-March quarter, as reported by The Guardian. Brent crude prices have risen sharply from about $61 a barrel in January, hitting $119.50 several weeks ago after the effective closure of the strait and dipped slightly on Tuesday.
BP's update comes amid a broader context of reduced global oil demand forecasts. The International Energy Agency (IEA) cut its forecasts for global oil demand this year, warning that both supply and demand would be affected by the conflict in the Middle East. Oil demand is now forecast to fall by 80,000 barrels a day this year, marking the first annual decline since the 2020 Covid pandemic.
BP's new CEO, Meg O'Neill, who took over this month, has promised to continue her predecessor’s shift away from low-carbon projects into oil and gas to increase profitability. She will face shareholders at the company's annual meeting on April 23.
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