European investment bank Berenberg has raised its price target on oil major BP to £6.50 from £6.05, signaling that the company's third-quarter profit is likely to be healthier than many expect, even as crude prices have slipped.
In a sector note, Berenberg said it expects BP's "underlying replacement cost profit"—the company's main measure of operating profit—attributable to shareholders to come in at $5.52 billion for the third quarter. That is slightly above the Visible Alpha consensus of $5.35 billion, suggesting the market may be underestimating the strength of BP's recent performance.
Why gas trading matters
The bank's optimism is largely about business mix. Berenberg believes that a stronger gas trading backdrop in BP's Gas & Low Carbon Energy unit can offset weaker results in Oil Production & Operations, which has been hit by lower Brent crude prices.
Trading profits depend more on volumes and price differences between markets than on the headline oil price. When gas markets are volatile or regional prices diverge, traders can capture wider margins. That means BP's earnings are not simply a reflection of where Brent is trading—they also reflect how well the company's trading desks navigate market dislocations.
However, trading gains can swing sharply from quarter to quarter. A strong quarter does not guarantee a repeat, and investors will likely press BP for clues on how durable this boost is when the company releases its trading statement on October 13th and full results on October 30th.
What it means for investors
If Berenberg's call is right, BP's quarter becomes less of a straightforward "oil price scorecard" and more a test of how much its gas trading operation can smooth earnings when crude is weak. That could lower the stock's sensitivity to Brent over time, but it also makes results harder to model, since a good trading quarter doesn't always repeat.
Despite the more upbeat profit view, Berenberg is not baking in bigger near-term cash returns. The bank expects BP to maintain a stable dividend and does not anticipate a share buyback. That means the market's reaction may hinge less on headline profit and more on whether BP can show this trading uplift is part of a durable earnings base rather than a one-off swing.
For everyday investors, the key takeaway is that BP's earnings are becoming more complex. While oil prices still matter, trading and other business segments are playing a larger role. That can be a positive diversifier, but it also adds uncertainty. As always, past performance is not a guide to future results, and individual investment decisions should be based on your own financial situation and risk tolerance.
Berenberg's move comes as other analysts are also adjusting their views on European oil majors. For instance, the bank recently raised its profit forecasts for Shell ahead of its October 29 update, suggesting a broader theme of gas trading strength across the sector.
Meanwhile, oil prices have been influenced by geopolitical developments, such as US-Iran talks cooling oil prices, which have weighed on Brent. But BP's trading business may be less exposed to these headline moves than its production arm.
Investors will also be watching broader commodity trends. For example, copper prices have firmed on China demand, and sugar prices are climbing due to El Niño, but these are less directly relevant to BP's earnings than gas and oil dynamics.
Ultimately, BP's third-quarter results will be a test of whether its trading strength is a reliable earnings driver or just a temporary tailwind. Investors should listen for management's commentary on the sustainability of trading gains and any signals about future capital returns.
