Who Doesn’t Benefit from Expensive Oil

XBR/USD

Key zone: 100.00 - 103.50

Buy: 105.00 (on a decisive break of 104.50); target 107.50-108.50; StopLoss 104.30

Sell: 97.50 (on strong negative fundamentals); target 93.50; StopLoss 98.20

At the beginning of the year, most analysts expected Brent crude to remain near $60 per barrel in 2026. However, developments in the Middle East completely reshaped the market landscape: oil is now firmly holding above $100, and the war in the Persian Gulf is widely viewed as a guaranteed source of windfall profits for major oil corporations.

In reality, things have proven far more complicated.

While European oil majors have significantly strengthened their positions, U.S. industry leaders are facing unexpected pressure on financial performance. High oil prices alone do not guarantee success — much depends on business structure, hedging strategies, and the ability to profit from market volatility.

A quick reminder

The first quarter ended with Brent near $118 per barrel, while refined petroleum products rose even more sharply. A significant share of Persian Gulf supplies was disrupted due to issues surrounding the Strait of Hormuz, boosting exports from the U.S., Africa, and Brazil.

At first glance, Western oil companies should have benefited from both higher sales volumes and stronger margins per barrel. Yet the results have been highly uneven.

• Since the conflict began, Shell shares have risen only around 4%, while TotalEnergies, BP, and Eni gained 14–17%.
• Chevron and Exxon reported net profits of $2.2 billion and $4.2 billion, respectively — down 37% and 46% year-over-year — while their stock prices declined.
• The differences in performance stem from three major factors: the scale of hedging, trading income, and geographic diversification of production assets.

At first glance, the drop in profits among U.S. oil giants appears counterintuitive — higher prices typically support the sector. However, much of the negative effect comes from accounting mechanics.

Oil and gas sales are often arranged months before delivery. To protect against price declines, companies heavily rely on hedging instruments — contracts designed to offset falling commodity prices. But when prices surge unexpectedly, the value of those hedges declines, creating so-called “paper losses.”

In the first quarter alone, this effect cost Chevron approximately $2.9 billion and Exxon roughly $3.9 billion.

Importantly, these are not direct cash losses. Higher realized selling prices later help offset the damage. However, U.S. accounting standards require hedging losses to be recognized immediately, temporarily distorting earnings results.

The key advantage for European companies lies in their advanced trading divisions.

Unlike American producers, European energy groups spent decades building sophisticated global trading networks. They do not simply extract and sell their own crude — they actively profit from regional arbitrage, delivery timing differences, fuel shortages, logistical disruptions, and pricing inefficiencies.

For example, BP trades roughly 12 million barrels of oil daily — nearly 11 times its own production output. In volatile markets, this model becomes exceptionally profitable.

American firms are only beginning to adapt. Chevron is aggressively expanding its internal trading infrastructure and increasingly selling oil through in-house divisions rather than intermediaries. In the near future, the company plans to independently market more than 40% of its production — double last year’s share.

This should allow Chevron to better capitalize on strong Asian fuel demand and manage refinery utilization more efficiently.

What does this mean?

The central paradox of the current oil crisis is that expensive oil benefits far fewer players than many assume.

European companies appear better positioned for prolonged volatility thanks to stronger trading operations and more flexible business structures. American oil giants, by contrast, are dealing with the side effects of their own operating models and growing dependence on U.S. political decisions.

The longer the Persian Gulf conflict continues, the wider the earnings gap between oil corporations may become.

Especially if the Trump administration moves to restrict fuel exports should gasoline prices climb to $5 per gallon. Such a move could widen the WTI discount to Brent and hit U.S. producers’ profitability across both upstream and refining operations.

As a result, the oil sector is becoming increasingly driven not only by crude prices themselves, but also by politics. White House decisions may prove just as important for the industry as developments in commodity markets.

So we act wisely and avoid unnecessary risks.

Profits to y’all!