BP’s profits for the first three months of the year have more than doubled following a surge in oil prices since the beginning of the Iran war.
In its first results since the conflict broke out, the energy giant reported profits of $3.2bn (£2.4bn) between January and March after an “exceptional” performance in its oil trading business.
The figure was higher than analysts had expected and far ahead of income in the same period last year which reached $1.38bn.
The oil price has seen sharp swings since the start of the US-Israel war with Iran as the key Strait of Hormuz – which usually carries about 20% of the global supplies of oil and liquid natural gas – has been effectively closed.
Before the conflict began, the price of Brent crude, the global benchmark for oil prices, was around $73 a barrel.
Since then, oil has risen to nearly $120 at one point, but it has also fallen below $100 as speculation has swirled over when the Strait of Hormuz will reopen. Brent currently stands at about $110 a barrel.
This volatility widens the gap between buying and selling prices, which typically enables traders to make bigger profits.
Profits in BP’s customers and products division, which includes its oil trading unit, surged to $2.5bn compared with just $103m a year ago
Chancellor Rachel Reeves said the performance of energy companies was “exactly why we extended the Energy Profits Levy to make sure that windfall profits could be taxed appropriately”.
“BP and other oil and gas companies play a really important part in our energy mix,” Reeves told the Commons, but she said it was important that windfall taxes are set “properly”.
Energy firms operating in the UK are subject to a windfall tax, called the Energy Profits Levy, that was introduced in 2022 as a response to soaring profits following Russia’s full-scale invasion of Ukraine. Labour extended the life of the tax to March 2030.
However, the levy only applies to profits made from extracting oil and gas in the UK, whereas the bulk of energy giants’ earnings are made overseas
The results are the first under BP’s new chief executive Meg O’Neill, who took over at the beginning of April when her predecessor, Murray Auchincloss, left after less than two years in the role.
O’Neill said she had joined “at a time when our industry is operating in an environment of conflict and complexity”.
She added BP had been “working with customers and governments to get fuel where it’s needed, helping minimize disruption”.
However, while BP’s trading business did well, its upstream production – which includes the search for and extraction of oil and gas – has been flat.
It also expects production between April and June to be lower, partly due to the “effects of disruption in the Middle East”.
BP’s share price rose 3% on Tuesday, and is up by about 20% since the Iran war began.
Susannah Streeter, chief investment strategist at Wealth Club, said BP’s trading division had “clearly thrived in an environment of wild swings, leading to high velocity trading”.
However, she noted that BP’s production was “not immune to the damage and destruction wreaked on facilities across the Gulf”.
Charles Hall, head of research at Peel Hunt, said BP was being cautious about the outcome for the second quarter.
While the strong performance from the trading side was “probably going to last a little bit longer”, he said: “There are other things going on and obviously it’s a pretty uncertain world at the moment.”
Environmental groups were sharply critical of BP’s latest results.
Mike Childs, head of science, policy and research at Friends of the Earth, said: “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.
“But again, it’s ordinary people who pay the price when soaring energy prices threaten to plunge the UK into an even deeper cost of living crisis.”
He added the UK needed to reduce its vulnerability to energy price shocks by increasing investment in renewable energy, as well as providing support for energy efficiency measures.
Gas and electricity bills for most UK households are protected for the moment by the energy price cap.
Until 30 June, the typical annual bill for dual-fuel households who pay by direct debit will be £1,641.
However, the jump in wholesale oil and gas prices since the Iran war began means the cap is currently estimated to rise by about £200 when it is revised in July.
