BP expects to post “exceptional” earnings from its oil trading desk, reaping a windfall from choppy energy markets triggered by the US-Israeli war on Iran.

Energy traders are navigating significant market volatility after Tehran’s effective closure of the key strait of Hormuz shipping route.

BP said on Tuesday that its refining margins had strengthened and that the “oil trading result is expected to be exceptional” in the first quarter of its financial year.

Last week, its UK rival Shell said it anticipated “significantly higher” oil trading profits for the quarter, after weeks of market volatility.

Analysts have been upgrading their profit forecasts, with the US bank Citi raising its estimate for BP by 20% to $2.6bn adjusted net income in the January to March quarter.

Brent crude has risen sharply from about $61 a barrel in January, and hit $119.50 several weeks ago after the effective closure of the strait. The global oil benchmark rose above $100 a barrel again on Monday and dipped 1% to $98.28 a barrel on Tuesday.

Brent averaged about $78 a barrel during the January-to-March quarter, compared with $63 in the fourth quarter and $75 a barrel during the same period last year, according to Reuters.

Analysts at JP Morgan Chase expect oil prices to stay above $100 a barrel in the second quarter, while Goldman Sachs last week reduced its forecast to an average price of $90 from $99 a barrel.

BP’s update came as the International Energy Agency cut its forecasts for global oil demand this year. In its latest oil market report, it warned that supply and demand would both be reduced by the conflict in the Middle East.

Oil demand is now forecast to fall by 80,000 barrels a day this year, whereas last month the IEA forecast demand would rise by 640,000. This would be the first annual decline since the 2020 Covid pandemic.

The group also said global oil supply plummeted by more than 10m barrels of oil a day in March, to 97m. It said continued attacks on energy infrastructure in the Middle East and restrictions to tanker movements through the strait had led to the largest disruption in history.

BP expects overall oil and gas production to be broadly flat in the first three months of the year. Refining margins rose to $16.9 a barrel in the first quarter from $15.2 a barrel in the previous three months, which is expected to lift earnings from refined products by $100m to $200m. BP is due to report first-quarter results on 28 April.

Meg O’Neill, who became the company’s fifth chief executive since 2020 this month, has promised to continue her predecessor’s shift away from low-carbon projects into oil and gas to inccrease profitability. She faces shareholders at the annual meeting on 23 April.