Why did Total, Shell, and BP's results significantly exceed expectations? The answer lies in their trading departments.
2026-05-12 18:02:18
In the first quarter of this year, European oil giants Total Energy, Shell, and BP all reported profits far exceeding expectations, attributing their strong performance to outstanding contributions from their oil trading businesses.
Total Energy reported first-quarter net income of $5.4 billion, a 29% year-over-year increase. The company's CEO stated that crude oil and petroleum product trading activity saw a "very strong performance" in March.
Shell reported adjusted earnings of $6.92 billion for the first quarter, up from $5.58 billion in the same period last year. The company's CFO noted a "significant improvement" in contributions from transactions and optimization.
BP reported first-quarter net income of $3.2 billion, more than double the $1.4 billion in the same period last year. The company's contribution from oil trading was described as "exceptionally strong."
Maurizio Carruli, equity research analyst at Quilter Cheviot Investment Management, explained that Total, Shell, and BP have been particularly successful in establishing large oil, gas, and liquefied natural gas trading divisions.
He emphasized that these oil giants' trading activities are based on physical hydrocarbons—resources they can actually transport globally via their own or leased ships and terminals. "In other words, it's a 'legitimate and long-term activity,' not financial speculation."
Alan Goode, Director of Equity Research at Morningstar, also points out that the existence of large trading groups helps European integrated oil companies differentiate themselves from U.S. competitors such as ExxonMobil and Chevron. European companies benefit more during periods of high volatility, such as the Russia-Ukraine conflict (2022) or the U.S.-Iran conflict (this year), because they are able to capitalize on trading opportunities while commodity prices are high.
However, the contribution of the trading department is volatile. "Because trading thrives during periods of volatility, its contribution is not consistent and therefore may not be fully recognized by the market," Goode said. But he added that most firms estimate that trading can add several hundred basis points to their return on capital over the entire cycle.
Media reports, citing estimates from five analysts, suggest that Total, Shell, and BP's trading divisions earned between $3.3 billion and $4.75 billion more in the first quarter compared to the fourth quarter of 2025. This performance highlights a certain transatlantic divergence—revealing a rare competitive advantage held by Europe's three largest oil giants, who have long struggled to close the valuation gap with their U.S. counterparts.
Carulli suggested that U.S. oil companies might also seek to establish large trading departments, "especially given the gradual shift of influence in the oil market from OPEC to the U.S." However, ExxonMobil and Chevron faced profit pressure this quarter due to losses from derivatives hedging—precisely the risks that trading departments should be managing.
AJ Bell's head of markets, Dan Cotsworth, pointed out that the trading departments of major oil companies are in the spotlight because they make a significant contribution to quarterly profits. "Since March, oil prices have fluctuated frequently, and greater price volatility has created more profit opportunities."
Despite the trading department's strong performance in the first quarter, several analysts warned that such extreme price volatility is not the norm for its business model.
Alastair Syme, Citigroup's global head of energy research, said that focusing solely on March's oil price fluctuations and using that to judge business trends is "slightly biased." He emphasized, "Ultimately, these businesses are meant to support integrated operations. Their primary task is to supply customers—and for that to be done, refining and marketing operations must function properly. If they make a lot of money from trading while there's a shortage of gas stations, that's a huge political problem."
Clark Williams-Derry, an analyst at the energy think tank IEEFA, issued a warning from a financial perspective: the operating cash flow of the top five oil giants fell to its lowest level since the pandemic in the first quarter. These companies have significantly increased their short-term debt and drawn on their cash reserves.
“All of this demonstrates that trading and hedging are a double-edged sword. Trading can be a source of long-term profits, but it also brings volatility and difficulties in cash management,” Williams-Derry said. “As oil companies get more and more involved in trading, their debt is also increasing.”
Overall, in the first quarter of this year, European oil giants such as Total Energy, Shell, and BP, thanks to their massive physical trading divisions, captured billions of dollars in extra profits amidst sharp market fluctuations, achieving performance far exceeding expectations and demonstrating a unique advantage over their American competitors.
However, the contribution of trading is highly volatile—boosting during periods of exceptional market volatility but not a stable and predictable source of profit. More importantly, while trading and hedging generate high profits, they also increase short-term debt, deplete cash reserves, and can pose challenges to the core mission of serving clients.
For investors, while trading departments are undoubtedly an important dimension for assessing the value of oil companies, their double-edged sword effect should not be ignored. For US oil companies, this divergence may prompt them to increase their investment in trading capabilities in the future. For European giants, however, how to translate their trading advantages into consistent and stable capital returns remains a key issue in narrowing the valuation gap.
Total Energy reported first-quarter net income of $5.4 billion, a 29% year-over-year increase. The company's CEO stated that crude oil and petroleum product trading activity saw a "very strong performance" in March.
Shell reported adjusted earnings of $6.92 billion for the first quarter, up from $5.58 billion in the same period last year. The company's CFO noted a "significant improvement" in contributions from transactions and optimization.
BP reported first-quarter net income of $3.2 billion, more than double the $1.4 billion in the same period last year. The company's contribution from oil trading was described as "exceptionally strong."
How does the trading department operate?
Maurizio Carruli, equity research analyst at Quilter Cheviot Investment Management, explained that Total, Shell, and BP have been particularly successful in establishing large oil, gas, and liquefied natural gas trading divisions.
He emphasized that these oil giants' trading activities are based on physical hydrocarbons—resources they can actually transport globally via their own or leased ships and terminals. "In other words, it's a 'legitimate and long-term activity,' not financial speculation."
Alan Goode, Director of Equity Research at Morningstar, also points out that the existence of large trading groups helps European integrated oil companies differentiate themselves from U.S. competitors such as ExxonMobil and Chevron. European companies benefit more during periods of high volatility, such as the Russia-Ukraine conflict (2022) or the U.S.-Iran conflict (this year), because they are able to capitalize on trading opportunities while commodity prices are high.
Divergence between Europe and the US: Trading capabilities become a competitive advantage for European oil giants
However, the contribution of the trading department is volatile. "Because trading thrives during periods of volatility, its contribution is not consistent and therefore may not be fully recognized by the market," Goode said. But he added that most firms estimate that trading can add several hundred basis points to their return on capital over the entire cycle.
Media reports, citing estimates from five analysts, suggest that Total, Shell, and BP's trading divisions earned between $3.3 billion and $4.75 billion more in the first quarter compared to the fourth quarter of 2025. This performance highlights a certain transatlantic divergence—revealing a rare competitive advantage held by Europe's three largest oil giants, who have long struggled to close the valuation gap with their U.S. counterparts.
US companies: May follow suit, but will face short-term pressure.
Carulli suggested that U.S. oil companies might also seek to establish large trading departments, "especially given the gradual shift of influence in the oil market from OPEC to the U.S." However, ExxonMobil and Chevron faced profit pressure this quarter due to losses from derivatives hedging—precisely the risks that trading departments should be managing.
AJ Bell's head of markets, Dan Cotsworth, pointed out that the trading departments of major oil companies are in the spotlight because they make a significant contribution to quarterly profits. "Since March, oil prices have fluctuated frequently, and greater price volatility has created more profit opportunities."
A double-edged sword: behind the profits lie cash flow pressures and rising debt.
Despite the trading department's strong performance in the first quarter, several analysts warned that such extreme price volatility is not the norm for its business model.
Alastair Syme, Citigroup's global head of energy research, said that focusing solely on March's oil price fluctuations and using that to judge business trends is "slightly biased." He emphasized, "Ultimately, these businesses are meant to support integrated operations. Their primary task is to supply customers—and for that to be done, refining and marketing operations must function properly. If they make a lot of money from trading while there's a shortage of gas stations, that's a huge political problem."
Clark Williams-Derry, an analyst at the energy think tank IEEFA, issued a warning from a financial perspective: the operating cash flow of the top five oil giants fell to its lowest level since the pandemic in the first quarter. These companies have significantly increased their short-term debt and drawn on their cash reserves.
“All of this demonstrates that trading and hedging are a double-edged sword. Trading can be a source of long-term profits, but it also brings volatility and difficulties in cash management,” Williams-Derry said. “As oil companies get more and more involved in trading, their debt is also increasing.”
Overall, in the first quarter of this year, European oil giants such as Total Energy, Shell, and BP, thanks to their massive physical trading divisions, captured billions of dollars in extra profits amidst sharp market fluctuations, achieving performance far exceeding expectations and demonstrating a unique advantage over their American competitors.
However, the contribution of trading is highly volatile—boosting during periods of exceptional market volatility but not a stable and predictable source of profit. More importantly, while trading and hedging generate high profits, they also increase short-term debt, deplete cash reserves, and can pose challenges to the core mission of serving clients.
For investors, while trading departments are undoubtedly an important dimension for assessing the value of oil companies, their double-edged sword effect should not be ignored. For US oil companies, this divergence may prompt them to increase their investment in trading capabilities in the future. For European giants, however, how to translate their trading advantages into consistent and stable capital returns remains a key issue in narrowing the valuation gap.
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