Oil stocks have rallied as the rest of the market has slumped.
BP is the latest large oil company to post its most profitable quarter in years, joining Exxon Mobil and Chevron in benefiting from soaring energy prices.
The price of a barrel of oil rose 50%, pushing crude oil to more than $100 a barrel, and in turn driving gas prices to a record $5 a gallon in the U.S.
BP credited “exceptional” oil trading and strong refining margins for its $8.5 billion in profits for the second quarter, up from $2.8 billion in the same period last year. It recorded $6.2 billion in profits for the first quarter, according to Barron’s. BP’s stock has risen more than 11% over the last month.
Big oil companies have benefited from rising energy prices as economies have bounced back and demand has skyrocketed post-Covid. What’s more, there has been a restriction of supply due to sanctions on Russia following its invasion of Ukraine. The oil industry was hit hard during the pandemic as the lockdown caused demand to drop and manufacturing to slow down.
BP said in a statement it expects “oil prices to remain elevated in the third quarter due to ongoing disruption to Russian supply, reduced levels of spare capacity, and with inventory levels significantly below the five-year average.”
There’s been debate whether oil prices will continue to rise or if a decline could be in store for the future. Most analysts are leaning toward a continuing uprise.
RBC Capital’s global energy strategist Michel Tran referred to the current environment as “the strongest fundamental oil market set up in decades, maybe ever.” He said even with a recession, we could see a multi-year cycle for the oil market.
Many analysts believe that oil prices will continue to soar. Many expect the global oil benchmark price to average $106.82 per barrel this year, a roughly $5 a barrel increase from their view in May, according to a poll by Reuters.
