BP lifts dividend as refining profit quintuples on Hormuz fuel supply crunch
Replacement cost profit in products surged to $4.63 billion from $662 million despite lower throughput, driven by diesel and gasoline margins at two to three times historical norms.
BP raised its quarterly dividend by four percent to 8.66 cents per share on Tuesday (2026-08-04), as underlying replacement cost profit climbed to $5.73 billion in the second quarter from $3.2 billion in the first three months of the year. The increase came in Meg O'Neill's first full quarter as chief executive.4
The profit surge was driven entirely by refining margins, not volumes. Replacement cost profit in the customers and products segment jumped to $4.63 billion from $662 million, even as refining throughput fell to 1.47 million barrels a day from 1.53 million b/d in the first quarter. Revenue climbed to $69.11 billion from $52.26 billion.4
The disconnect between shrinking throughput and soaring earnings reflects the fuel supply crunch triggered by the effective closure of the Strait of Hormuz. Goldman Sachs estimated global refined product exports have dropped by 4 million barrels daily from pre-war levels, with Middle East refinery output alone down 2.5 million b/d. The bank said in a note during the week of June 1 (2026-06-01) that refining margins had climbed to two to three times the 2013-2019 average, with diesel margins between $19 and $26 per barrel higher than before March.1
BP's upstream production fell to 1.44 million barrels of oil equivalent a day in the April-June period from 1.54 million boe/d in the first quarter. Gas output declined to 3.93 million cubic feet per day from 4.12 MMcfd. Operating cash flow rose to $10.86 billion from $2.86 billion, reflecting the margin expansion.4
For the third quarter, BP said it expects refining throughput of 1.30 to 1.36 million b/d, reflecting the completion of the Gelsenkirchen divestment and lower planned turnaround activity. The guidance suggests BP is prioritising margin capture over volume maximisation, a rational response when fuel market tightness delivers outsized returns per barrel processed.4
The US Energy Information Administration reported in July (2026-07-15) that second-quarter petroleum markets were characterised by continued disruptions to crude and product flows through the Strait of Hormuz, contributing to higher and more volatile crude oil prices through most of the quarter.3
Yet demand destruction is cutting into the supply shortage. The International Energy Agency now projects global oil demand fell by 2.45 million b/d year-over-year in the second quarter, with full-year demand expected to decline by 420,000 b/d — about 1.3 million b/d below pre-conflict forecasts.2
Goldman Sachs warned that gasoline and diesel stocks are likely to decline further in the initial stage of a Hormuz reopening, as demand recovers faster than supply. Russian diesel output has compounded the tightness, with Reuters estimating a ten percent drop in May after a similar decline in April due to drone attacks.1
ICE Brent crude front-month traded at $80.63 per barrel as of Wednesday morning (2026-08-05), up 0.11 percent. NYMEX heating oil front-month held steady at $3.80 per gallon.
The dividend increase signals confidence that elevated fuel margins will persist, but BP's throughput guidance points to structural constraints — divestments and planned maintenance — that will cap how much profit the company can extract even if margins stay high. The risk is that Hormuz reopens faster than Goldman expects, unwinding the supply deficit before BP can bring its full refining capacity back online.