A shareholder revolt and a pivot back to fossil fuels has positioned BP plc as the unlikely outperformer among oil supermajors, with its stock gaining 20% since the start of the US-Iran war, while rival ExxonMobil Corp. has seen its shares fall 1% as its Middle East production remains constrained.
A shareholder revolt and a pivot back to fossil fuels has positioned BP plc as the unlikely outperformer among oil supermajors, with its stock gaining 20% since the start of the US-Iran war, while rival ExxonMobil Corp. has seen its shares fall 1% as its Middle East production remains constrained.
BP's deft trading operations are expected to deliver "exceptional" first-quarter results, a stark contrast to the nearly $7 billion in hedging losses that Exxon and Chevron are projected to face. The divergence in performance shows the deep impact of the conflict on global energy markets, rewarding companies with agile trading arms and punishing those with significant production assets inside the Strait of Hormuz.
"The Iran war and the loss of oil and gas supply from the Middle East have upended the stock performance of the biggest international majors," said Tsvetana Paraskova, a writer for Oilprice.com. "BP, the laggard of the past six years, has moved ahead of all others."
While Brent crude has surged over 45% to more than $100 a barrel since the conflict began, the gains have not been evenly distributed. BP's limited production exposure to the Middle East, combined with its powerful trading division that thrives on volatility, has created a winning formula. In contrast, about one-fifth of Exxon’s global oil and gas output is trapped inside the Strait of Hormuz, and a key LNG facility it co-owns in Qatar was damaged by Iranian missile strikes, with repairs expected to take years.
The market is now repricing geopolitical risk, with investors closely watching upcoming earnings reports for further details. BP is set to report on Tuesday, followed by TotalEnergies SE on Wednesday, Exxon and Chevron Corp. on Friday, and Shell plc on May 7. Analysts polled by Bloomberg expect the five supermajors to post a combined profit of $192 billion for the quarter, a 3% increase from the previous period.
The conflict has highlighted the strategic differences between European and American oil giants. European firms like BP, Shell, and TotalEnergies have long maintained large, sophisticated trading operations that can capitalize on price swings and supply disruptions. American companies, by contrast, have traditionally taken a more conservative approach, often hedging their production and limiting their exposure to trading risks.
This quarter, that conservatism has been costly. Exxon and Chevron are expected to report significant losses from their hedging strategies, which were designed to protect against price downturns but have backfired in a rising market. BP, on the other hand, has signaled that its trading profits will be a major contributor to its strong quarterly performance.
BP's recent success is also a validation of its decision last year to scale back its renewable energy investments and refocus on its core oil and gas business. The move, which came after years of pressure from shareholders, was initially met with skepticism but now appears prescient. The company's lower valuation relative to its peers has also made it a more attractive investment, providing greater upside potential.
"BP's outperformance is a combination of a low valuation and the market's positive reception to its new CEO and a renewed focus on its core business," said James West, an energy analyst at Melius Research. "Exxon has some of its production stuck inside the strait, while BP is benefiting from a turnaround story."
However, analysts caution that BP still faces challenges in convincing investors that its recent success is sustainable. "A 'higher for longer' oil price environment is undoubtedly beneficial for BP, but there is still a lot of work to be done to rebuild investor confidence," wrote Joshua Stone, head of European energy equity research at UBS, in a recent report.
This article is for informational purposes only and does not constitute investment advice.
