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How Europe’s Oil Traders Won Big | Analysis by Brian Moineau

Posted on by Brian Moineau

When traders beat drillers: how BP, Shell and TotalEnergies cashed in on Iran war volatility

A funny thing happened while the world was watching tankers and pipelines: trading desks at BP, Shell and TotalEnergies outshine US rivals. Traders at the big European majors turned the chaos from the Iran war into a near-term profit bonanza, using physical assets and deep derivatives benches to exploit price dislocations across crude, refined fuels and LNG markets.

This isn’t just a quirk of accounting. It highlights a structural difference across Big Oil: European groups have built vast, integrated trading machines that can both secure physical flows and place fast, large financial bets when volatility spikes. That mix of scale, optionality and agility turned what looked like a supply shock into cash for shareholders — and a headache for critics.

Why the trading windfall mattered

  • Volatility creates arbitrage. When route closures, outages and sudden reroutings make the same barrel worth different things in different places, traders who control shipping, storage and refinery access can profit from moving oil and paper contracts around the globe.
  • Physical footprint + derivatives = advantage. European majors combine refineries, terminals and fleet with active futures and options desks. That allows them to capture spreads that pure producers can’t.
  • Timing and scale. The shock to supply after late February (the conflict escalated and disruptions around the Strait of Hormuz followed) produced price spikes and extreme short-term moves. That’s where big trading operations shine.

Analysts and company updates suggest the trio’s trading gains were measured in the billions for the first quarter, with estimates varying by methodology — but the scale is unmistakable. These gains helped offset lost upstream output and made headline profits look stronger than many expected.

Trading desks at BP, Shell and TotalEnergies outshine US rivals

Reuters and other outlets have hammered on the contrast: BP, Shell and TotalEnergies run huge trading arms (trading volumes measured in millions of barrels per day), while the largest US producers — Exxon and Chevron — traditionally kept trading tightly tied to internal flows and limited independent market-facing bets.

  • BP, Shell and TotalEnergies trade materially more oil than they produce, giving them the flexibility to act as market makers and arbitrageurs.
  • US majors focus on scale in upstream production and historically restrained their third‑party trading activity, which reduces exposure to the wild swings that create outsized trading profits — but also limits windfall opportunities.

That tradeoff produced a transatlantic divide: European companies benefited immediately from volatility; U.S. giants benefit if and when high prices persist through bigger upstream cash flows.

What actually happened in the market

When physical flows became constrained, several dynamics unfolded at once:

  • Benchmarks jumped and spreads widened. Brent surged into triple digits at times; regional price gaps opened for diesel, jet and gasoline.
  • Cargo routing became creative. Traders rerouted products along unconventional pathways (for instance, shipping from Europe to Asia) to meet local shortages, and those long-route moves created both physical and paper profits.
  • Working capital ballooned. Holding cargoes, longer voyages and larger inventories tied up billions in capital — profitable when prices moved the right way, but risky if they reversed.

So profits were real but paired with elevated balance-sheet and execution risks. Several articles and company comments point out that trading can generate big losses as well as gains; size multiplies both.

The implications — for investors and policy

  • Valuation gaps may widen. If trading becomes a more central, recurring contributor to European majors’ earnings, investors could value them differently versus US peers that remain more upstream-heavy.
  • Earnings quality questions rise. Some investors and policymakers will ask whether volatility-driven trading gains are sustainable, and how transparent companies should be about the breakdown of trading vs. industrial results.
  • Political scrutiny increases. Windfall-style profits from geopolitical shocks often draw political heat and calls for windfall taxes or stricter disclosure — especially when energy prices bite consumers.

Transitioning from short-term effects to longer-term positioning, the story is a reminder that corporate strategy (build trading muscle or double down on production) shapes resilience and winners during crises.

Lessons from the episode

  • Integration pays off in turmoil, but at a cost. Vertical integration allowed majors to capture margin in a market shock — though running such desks requires capital, hedging sophistication and risk controls.
  • Diversification of capabilities matters. Companies that can flexibly combine physical logistics and financial markets will continue to have an edge in stressed energy markets.
  • Volatility is a two-way street. The same market conditions that produced windfalls can quickly reverse, exposing firms with big directional positions to rapid losses.

My take

The Iran war’s market shock underlined a simple truth: in energy markets, optionality is everything. European majors built optionality into their models for decades — partly as a commercial edge, partly to secure supplies for operations and retail networks. That optionality paid off spectacularly this quarter. But the episode also raises awkward questions about transparency, risk and the social licence of companies profiting while supply and consumer prices are under pressure.

If this becomes a recurring playbook — lean into trading to offset weaker upstream positions — investors will need to price those risks and rewards differently. Regulators and policymakers, meanwhile, will likely press for clearer reporting on trading results and for mechanisms to ensure consumers aren’t disproportionately harmed by market gaming during crises.

Final thoughts

Markets are machines for re-pricing risk. When geopolitics rips a hole in supply, the winners won’t always be the biggest pumps in the ground — sometimes they’re the teams that can thread a cargo through a storm and hedge the paper around it. That reality matters for company strategy, investor positioning and how we think about energy resilience in an increasingly unstable world.

Sources



Related update: We recently published an article that expands on this topic: read the latest post.

Fuel Spike Pushes UK Inflation to 3.3% | Analysis by Brian Moineau

Posted on by Brian Moineau

When a litre at the pump becomes a headline: UK inflation jumps to 3.3% in March as fuel prices surge amid Iran war – CNBC

The phrase "UK inflation jumps to 3.3% in March as fuel prices surge amid Iran war – CNBC" landed in many inboxes this week, and it captures a simple, uncomfortable truth: geopolitics can show up at the filling station and in the household budget almost overnight. The Office for National Statistics reported headline CPI rising to 3.3% in March 2026, driven largely by one volatile element — motor fuel — which the ONS said recorded its largest increase in over three years.

Let’s walk through what happened, why it matters, and what to watch next — without the dry economese.

Why fuel pushed inflation up (and why that’s different from other inflation spikes)

A shock to supply is the clearest story here. The military conflict in and around Iran has tightened flows of crude and refined products, and global oil prices jumped as traders priced in disruption to shipping through the Strait of Hormuz. That translated quickly into higher wholesale and pump prices for petrol and diesel.

  • Motor fuel swung from an annual decline one month to a notable rise the next — the kind of movement that drags headline inflation with it because energy is a price-sensitive category.
  • The ONS highlighted the March jump in petrol and diesel as the single largest upward driver of the month’s CPI change.
  • Other categories — airfares and some food items — also nudged higher, but fuel was the headline-grabber.

This type of inflation is often called “imported” or supply-driven: it is concentrated, externally sourced, and (crucially) can be more transitory than broad-based domestic price pressures that come from wages or services.

The wider context: where the UK had been and where this bumps things

Heading into March, UK inflation had been trending downward from the highs of the past couple of years and was sitting around 3.0% in February. That decline allowed markets and some policymakers to hope the Bank of England could ease its stance later in the year.

The March data complicate that picture:

  • A rise to 3.3% suggests inflation momentum has re-accelerated, at least temporarily.
  • Central banks care about both the level and the persistence of inflation. A one-off commodity shock is one thing; a shock that spreads into wages, rents, and services is another.
  • For households already stretched by higher living costs, even a modest uptick has real consequences — especially for drivers and businesses with fuel-intensive operations.

So while this jump looks—on the surface—like a sharp, externally driven blip, its policy implications depend on whether the effect lingers and broadens.

What this means for consumers, businesses and policy

Short-term pain is obvious. Higher petrol and diesel bills hit consumers at the point of sale and raise operating costs for firms that transport goods. Less obvious are the next-round effects.

  • Consumers: More of the weekly budget goes to fuel, leaving less for discretionary spending. That can slow retail and service-sector growth.
  • Businesses: Firms with thin margins and high fuel use face squeezed profits or pass-through of higher costs to customers. Small businesses are most vulnerable.
  • Monetary policy: The Bank of England watches core inflation (which strips out energy and food), but repeated or persistent energy shocks can bleed into core through wage demands or higher service costs. That could delay or complicate any plans for interest-rate cuts.

Importantly, if the fuel spike is short-lived and global supply stabilises, the headline rate should ease again. If the conflict persists or other supply constraints appear, the upside risk to inflation grows.

Looking beyond the pump: ripple effects to watch

This episode is a reminder that headline inflation is the sum of many moving parts — and a few categories can matter a great deal.

  • Wages: If higher living costs push workers to seek bigger pay rises, that can entrench inflation. Watch earnings data.
  • Services inflation: Services are stickier. Rising transport and energy costs can feed into prices for hospitality, logistics, and other service sectors.
  • Expectations: If households and firms start expecting higher inflation going forward, those expectations can become self-fulfilling. Surveys of inflation expectations will be telling.
  • Fiscal buffers: Government policies that cushion energy costs (tax changes, subsidies) can blunt immediate pain but may carry fiscal costs and distort price signals.

Transitioning from a single-month spike to a sustained inflationary trend requires transmission into these broader channels — and that’s the key distinction for markets and policymakers.

Where the numbers came from and why to trust them

The figures are from the Office for National Statistics’ March 2026 Consumer Price Index release, which provides the official breakdown of what drove the 3.3% headline rate. Multiple reputable outlets summarised the same bulletin and the ONS commentary that motor fuels posted their largest increase in more than three years.

Those ONS releases are the reference point for economists and the Bank of England, and they disaggregate changes by category so we can see whether an event is narrowly concentrated or broadly spread.

What to watch next

If you’re tracking this as a consumer, investor or manager, keep an eye on:

  • Oil and refined product prices and any news about shipping or supply routes.
  • Next month’s ONS CPI release — will motor fuel cool off or continue to climb?
  • Wage and services inflation data, which indicate whether the shock is spreading.
  • Bank of England commentary and market pricing for rate changes.

Short-term volatility in energy markets is normal; the important question is whether that volatility becomes persistent.

My take

This March spike is a classic example of geopolitical risk migrating quickly into everyday economics. It’s painful for drivers and energy-intensive firms, but it’s not yet a full-blown, economy-wide inflation problem — not until those higher costs feed into wages and services. The sensible posture for households is realism: tighten budgets where you can, but keep an eye on broader labour-market signals before assuming long-term price increases.

For policymakers, the tightrope remains the same: resist overreacting to a potentially temporary supply shock while staying alert for signs it’s seeding longer-term inflationary pressures.

Sources



Related update: We recently published an article that expands on this topic: read the latest post.

Related update: We recently published an article that expands on this topic: read the latest post.