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BP reports record Q1 profits as oil trading soars
BP announced a more than twofold increase in first-quarter profits, reaching $3.2 billion (£2.4 billion), driven by exceptional performance in its oil trading division amid geopolitical turmoil in the Middle East.
Oil price swings fuel trading gains
The energy giant's earnings surpassed analyst expectations, with profits nearly doubling compared to the $1.38 billion recorded in the same period last year. The surge follows sharp fluctuations in oil prices triggered by the closure of the Strait of Hormuz, a critical chokepoint for global oil and liquid natural gas supplies, which typically handles about 20% of worldwide shipments.
Brent crude, the global oil benchmark, initially traded at around $73 per barrel before the conflict escalated. Prices later spiked to nearly $120 per barrel before settling at approximately $110, creating lucrative opportunities for traders due to the widened gap between buying and selling prices.
Trading division leads profit growth
BP's customers and products division, which includes its oil trading unit, saw profits skyrocket to $2.5 billion, up from just $103 million a year earlier. The company attributed the gains to its ability to navigate volatile markets and supply disruptions.
"We have been working with customers and governments to get fuel where it's needed, helping minimize disruption," said BP's new CEO, Meg O'Neill, who took the helm in early April.
Meg O'Neill, BP Chief Executive
UK windfall tax extended amid criticism
Chancellor Rachel Reeves defended the extension of the Energy Profits Levy, a windfall tax on oil and gas companies introduced in 2022 following Russia's invasion of Ukraine. The tax, now set to run until March 2030, aims to capture excess profits from soaring energy prices.
However, the levy applies only to profits from UK oil and gas extraction, leaving the bulk of BP's overseas earnings untouched. Reeves acknowledged the role of energy firms in the UK's energy mix but emphasized the need for "properly set" windfall taxes.
Production challenges and market reaction
Despite the strong trading performance, BP's upstream production-encompassing oil and gas exploration and extraction-remained flat. The company expects output to decline in the second quarter due to ongoing disruptions in the Middle East.
BP's share price rose 3% on Tuesday, extending a 20% gain since the Iran conflict began. Analysts noted that while trading profits may persist, broader uncertainties loom over the sector.
"BP is being cautious about the second quarter. There are other things going on, and it's a pretty uncertain world at the moment," said Charles Hall, head of research at Peel Hunt.
Charles Hall, Peel Hunt
Environmental groups condemn profits
Environmental campaigners criticized BP's windfall, arguing that fossil fuel giants benefit from global instability while consumers bear the brunt of rising energy costs.
"Just as we saw in 2022 following Russia's invasion of Ukraine, fossil fuel giants are quids-in when global instability drastically inflates fuel prices," said Mike Childs, head of science, policy and research at Friends of the Earth.
Mike Childs, Friends of the Earth
Childs urged the UK to reduce its vulnerability to energy price shocks by accelerating investment in renewable energy and improving energy efficiency measures.
Energy price cap set to rise
UK households are currently protected by the energy price cap, which limits annual dual-fuel bills to £1,641 for typical direct debit customers until 30 June. However, the cap is expected to rise by around £200 in July due to the recent spike in wholesale oil and gas prices.
