Oil prices provide a powerful tailwind
The biggest change since BP issued its second-quarter guidance has been the strength of the oil market.
Brent crude has traded above $100 a barrel amid continuing disruption to energy supplies and shipping through the Strait of Hormuz. On 8 October, Brent rose above $104 as attacks on Gulf shipping and US threats of bombarding Iran increased supply concerns.
That is potentially significant for BP because its second-quarter average Brent marker was $103.85 a barrel, already well above the $67.88 recorded a year earlier. Higher liquids realisations were one of the main reasons second-quarter underlying profit increased to $5.73 billion.
However, investors should not assume that every additional dollar in Brent flows straight into earnings. BP’s production volumes, realised prices, trading performance, refining margins and hedging all affect the eventual result.
Indeed, BP has already warned that the third quarter would be affected by continued Middle East disruption and lower production.
Those tracking the oil market and its impact on energy stocks can access Brent crude and other commodity markets through our platform.