trading

The conflict involving Iran and the disruption of the Strait of Hormuz have shaken global energy markets. Supply constraints and extreme volatility have driven oil prices sharply higher, exposing a growing structural divide in how major oil companies operate across the Atlantic.

European majors profit from trading strength
Companies such as BP, Shell, and TotalEnergies have benefited from strong oil trading performance. Their global trading networks allow them to move crude and refined products across regions, taking advantage of price differences created by supply disruptions.

These firms trade volumes far exceeding their own production, turning volatility into profit. In the current crisis, trading has significantly boosted earnings, offsetting weaker performance in other segments.

Volatility creates both gains and exposure
The sharp rise in Brent crude prices and market instability has created lucrative arbitrage opportunities. Companies have rerouted fuel shipments across longer and unusual routes to capture higher margins.

However, these strategies come with risks. Trading at such scale requires large amounts of capital, and holding cargoes for extended periods increases financial exposure if market conditions shift.

Trading as a shock absorber
For European majors, trading divisions have acted as a buffer during the crisis. Losses from disrupted production or regional exposure have been partially offset by gains in trading, highlighting the strategic importance of these operations in volatile markets.

US majors rely on production strength
In contrast, Exxon Mobil and Chevron focus primarily on large scale oil and gas production. Their output significantly exceeds that of European rivals, giving them a strong advantage when prices rise.

While they have more limited trading operations, their upstream strength allows them to generate substantial cash flow in high price environments without relying heavily on market arbitrage.

Structural differences in strategy
The divergence reflects long term strategic choices. European companies invested more heavily in renewables and diversified energy portfolios, which limited growth in their upstream production. US firms, by contrast, maintained a strong focus on expanding oil and gas output.

As a result, European majors depend more on trading to drive returns, while US majors depend on production scale.

Analysis
The Iran war has highlighted a clear split in the global energy industry between trading focused and production focused business models. European majors have shown that strong trading capabilities can generate significant profits during periods of disruption, effectively turning volatility into an advantage.

However, this model is inherently unpredictable. Trading gains depend on market conditions and may not be sustainable if volatility declines. In contrast, the US model offers more stable returns tied directly to production levels and commodity prices.

In the long term, this divide could shape investor perceptions and valuations. If European companies continue to rely heavily on trading while lagging in production, the gap between them and US rivals may widen. The industry is increasingly defined by a fundamental question: whether it is more profitable to move oil around the world or to produce it at scale.

With information from Reuters.

March 16 (UPI) — Emergency services in the United Arab Emirates were battling a major blaze at the country’s strategically key Fujairah oil export hub on Monday morning after the second drone strike on the facility in two days.

Emirate of Fujairah authorities said in a post on X that no one had been hurt in the attack on the Fujairah Industrial Petroleum Zone and that efforts were ongoing to bring the fire under control. They appealed to people to refrain from spreading misinformation.

“Civil defense teams in the Emirate immediately responded to the incident and are continuing their efforts to control it. The competent authorities call on the public not to circulate rumours and to obtain information only from official sources,” wrote the Fujairah Media Office.

The facility is strategically important because it is the only oil export terminal on the UAE’s eastern coast, located on the Gulf of Oman, the “good” end of the Strait of Hormuz.

Critically, it means oil tankers servicing the port do not need to run the gauntlet of the 21-mile-wide sea lane that Iran has effectively closed.

An approximately 250-mile-long cross-country oil pipeline from Habshan, a key onshore field 80 miles southwest of Abu Dhabi, feeds as much as 1.8 million barrels per day of crude into Fujairah.

However, Iran’s Islamic Revolutionary Guard Corps threatened ports, docks, military facilities and other “legitimate” U.S. targets in the UAE while the state media uged workers and residents in and around Fujairah, Jebel Ali and Khalifa ports to evacuate due to the presence of U.S. military forces.

Monday’s incident, following on from a separate strike and fire on Saturday, highlighted how exposed Fujairah — one of the world’s key crude oil and fuel storage hubs — was to Iranian threats.

The UAE has been repeatedly targeted by Iranian drones and missiles since the United States launched its airborne offensive against Iran on Feb. 28.

A drone attack earlier Monday that forced the temporary grounding of all flights at Dubai International Airport after a fire erupted in a fuel tank close by and an announcement by Israel that it was nowhere near done with hitting Iran indicated the war was likely headed into a third week.

Israel also announced plans for an expansion of its ground offensive in Lebanon against Hezbollah operatives and strongholds after the Iranian proxy group attacked Israel with rockets and missiles on March 2, two days into the war.

An Israeli bombing campaign and targeted actions by ground forces has already forced hundreds of thousands of civilians in the country to flee their homes and killed more than 850, more than 170 of them women and children, according to the Lebanon Health Ministry.

European Union foreign ministers were set to meet on Monday in Brussels to discuss the situation in the region as oil prices continued their upward trajectory with the benchmark Brent crude futures briefly hitting $106 per barrel during trade on Monday.

Shipping of oil, gas and all cargo through the Strait of Hormuz remains stalled despite calls by U.S. President Donald Trump at the weekend for countries that get their oil from Gulf producers to step up and help restart movement of ships in and out of the Persian Gulf.