We all knew the conflict in Iran would be a tailwind for London’s oil majors, but until this morning’s trading update from BP, we didn’t know quite how strong that tailwind had become.
Trading Strength Comes Through Clearly
The numbers begin to put substance behind the narrative. Brent crude averaged $81.13 per barrel in the first quarter, up from $63.73 in the prior quarter, while US natural gas prices also moved higher. BP’s own sensitivity guide suggests that every $1 move in oil prices can translate into around $340 million of pre-tax operating profit over a full year, which puts the recent move in crude into perspective.
That environment has fed directly into performance. BP expects its oil trading division to deliver an exceptional result for the quarter, a sharp improvement from the weakness seen at the end of last year. At the same time, refining margins have moved higher, with the refining indicator margin rising to $16.9 per barrel from $15.2, reflecting stronger realised pricing across the system.
There are trade-offs. Net debt is expected to increase into a $25 to $27 billion range, driven by a working capital build of between $4 and $7 billion as BP positions itself within a more volatile pricing environment. The takeaway is clear though. The tailwind is real and now quantified, but with the shares already moving higher into the update, the focus shifts to whether this is new information or confirmation of what price has already priced in.
Momentum Pauses as Price Tests Long-Term Highs
The momentum behind BP’s strong start to the year accelerated as the conflict began, but as price has pushed into long-term areas of resistance around the February 2023 and October 2018 highs, that momentum has started to stall.
Recent price action suggests a shift in behaviour rather than a change in trend. The strong directional move has given way to tighter price action, with swings becoming smaller and upside follow-through less consistent. This is often how markets behave when they reach significant levels after a sustained move, particularly when a large portion of the good news is already reflected in positioning.
From here, a period of consolidation near the highs looks the more likely outcome. The early signs of a triangle or wedge-type structure are beginning to form, which would allow the market time to reset before the next directional move. Periods like this are a normal part of strong trends, but they do require patience, with the next move likely to be driven by how price resolves this compression rather than the initial reaction to the news itself.
BP. Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81.31% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Trading Strength Comes Through Clearly
The numbers begin to put substance behind the narrative. Brent crude averaged $81.13 per barrel in the first quarter, up from $63.73 in the prior quarter, while US natural gas prices also moved higher. BP’s own sensitivity guide suggests that every $1 move in oil prices can translate into around $340 million of pre-tax operating profit over a full year, which puts the recent move in crude into perspective.
That environment has fed directly into performance. BP expects its oil trading division to deliver an exceptional result for the quarter, a sharp improvement from the weakness seen at the end of last year. At the same time, refining margins have moved higher, with the refining indicator margin rising to $16.9 per barrel from $15.2, reflecting stronger realised pricing across the system.
There are trade-offs. Net debt is expected to increase into a $25 to $27 billion range, driven by a working capital build of between $4 and $7 billion as BP positions itself within a more volatile pricing environment. The takeaway is clear though. The tailwind is real and now quantified, but with the shares already moving higher into the update, the focus shifts to whether this is new information or confirmation of what price has already priced in.
Momentum Pauses as Price Tests Long-Term Highs
The momentum behind BP’s strong start to the year accelerated as the conflict began, but as price has pushed into long-term areas of resistance around the February 2023 and October 2018 highs, that momentum has started to stall.
Recent price action suggests a shift in behaviour rather than a change in trend. The strong directional move has given way to tighter price action, with swings becoming smaller and upside follow-through less consistent. This is often how markets behave when they reach significant levels after a sustained move, particularly when a large portion of the good news is already reflected in positioning.
From here, a period of consolidation near the highs looks the more likely outcome. The early signs of a triangle or wedge-type structure are beginning to form, which would allow the market time to reset before the next directional move. Periods like this are a normal part of strong trends, but they do require patience, with the next move likely to be driven by how price resolves this compression rather than the initial reaction to the news itself.
BP. Daily Candle Chart
Past performance is not a reliable indicator of future results
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81.31% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.