European oil majors’ first-quarter profits were lifted by bumper trading gains as the Iran war upended supply chains, underscoring how the ability to shift barrels around the world can sometimes trump pumping them out of the ground.
BP (BP.L), Shell (SHEL.L) and TotalEnergies (TTEF.PA) have spent years building vast oil trading machines that now sit at the heart of their business - setting the European majors apart from their larger U.S. peers, for better or worse.
BP reported first-quarter net profit of $3.2 billion on Tuesday, more than double last year’s figure, largely thanks to what BP referred to as an exceptional performance of its oil trading. The customers and products division, which houses oil trading, delivered profit before interest and tax of $3.2 billion, the best result since Russia’s invasion of Ukraine in 2022.
By ROI calculations, BP’s oil trading – the buying and selling of crude and fuels to supply its global retail network and end customers – likely contributed around $1.5 billion in pre-tax profit in the quarter.
The scale of BP’s trading operations represents both upside potential and risk. The company trades about 12 million barrels of oil per day - the equivalent of roughly 11% of global demand - 10 times BP’s upstream production and eight times its refining capacity.
TotalEnergies, which trades around 8 million bpd, reported on Wednesday a net profit of $5.4 billion in the quarter, a 29% year-on-year gain, also driven by strong trading. Earnings from the refining and chemicals segment, home to Total's oil trading, more than quintupled to $1.6 billion from a year earlier.
Shell, which trades an estimated 14 million bpd, also flagged strong first-quarter trading performance ahead of its May 7 results.
OPPORTUNITY AND RISK
A sprawling web of refineries, pipelines, storage terminals and tankers, combined with a large derivatives trading desk, gives the majors exceptional flexibility to exploit small price dislocations across regions and products. When those dislocations become seismic – as they did over the past two months – the opportunities, and the dangers, multiply.
Since the Iran war broke out on February 28 and the Strait of Hormuz was effectively closed, more than 13 million bpd of oil production - around 13% of global supply - has been trapped inside the Gulf, sending shockwaves through crude and refined product markets.
The impact has been massive. Brent crude has risen more than 60% to over $115 a barrel since the war began, accompanied by tremendous volatility across oil, fuel and liquefied natural gas markets.
Disruptions of that scale create profitable arbitrage opportunities. One example is rerouting diesel and jet fuel along highly unusual paths, such as shipping cargoes from Europe to Australia, where prices have surged since the start of the conflict.
But trading at this scale is capital-intensive and unforgiving if bets go wrong. Holding large cargoes on tankers for extended periods ties up enormous sums of money.
BP’s working capital jumped by $6 billion in the quarter, including $4.1 billion driven by higher oil prices, longer shipping routes and bigger inventories, the company said. Those positions should unwind over coming months, but the exposure is significant.
The large trading arms have functioned well as shock absorbers, offsetting losses suffered during this turbulent period.
BP has significant exposure in the Gulf. Equity upstream production in the Middle East represented around 411,000 bpd – or 17% of its total output in 2025. TotalEnergies' operations in Qatar, Iraq and the United Arab Emirates account for 15% of production. Shell also flagged lower output due to outages in Qatar.
BP estimates that trading typically delivers up to a 4% uplift to returns on average capital employed. Shell offers similar guidance. In periods of extreme volatility, that uplift is almost certainly higher.
UNRIVALED OUTPUT
Exxon Mobil (XOM.N) and Chevron (CVX.N) may view their European rivals’ trading windfalls with envy.
The two U.S. giants have long kept trading tightly constrained, only using it to handle internal upstream and downstream volumes. Past attempts to build more independent trading desks fizzled out, in part because highly centralised decision-making at these firms made it hard for traders to act quickly in fast-moving markets.
That contrast cuts both ways. Exxon and Chevron may not match the European majors’ trading success, but the scale and quality of the U.S. giants’ upstream operations dwarf those of their rivals across the pond.
In 2025, Exxon and Chevron produced about 4.7 million bpd and 3.7 million bpd of oil and gas, respectively, well above BP’s 2.3 million, Shell’s 2.8 million and TotalEnergies' 2.5 million.
Europe’s weaker upstream position reflects, in part, years of heavy investment in renewables and low-carbon fuels earlier this decade. BP and Shell are now rowing back from that strategy after heavy losses, but remain well behind their U.S. rivals.
Exxon and Chevron’s vast production engines will throw off enormous amounts of cash if prices stay high in the wake of the Iran war, while the trading windfalls of BP, Shell and TotalEnergies may not be replicated if volatility declines.
Trading operations are both opaque and highly volatile, making them hard for investors to price. If trading becomes ever more central to European majors' operations - given their inability to match U.S. rivals on production - the transatlantic valuation gap could widen further.
The energy industry is thus increasingly likely to be defined by a new divide: traders versus drillers.
(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.)
Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn, and X.
And listen to the Morning Bid daily podcast on Apple, Spotify, or the Reuters app. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.
