Member Info for IanKellett

The recent BP note by Lydia highlighted that of BP’s gulf oil production, which was obviously being marked down in earnings forecasts, their Iraq Kirkuk production was most exposed and most difficult. This route out to Ceyhan is very good news indeed for BP IMHO, and should lead to modest upward earnings revisions in next 2-3 weeks for those analysts paying attention.

Only the most recent one Boxter (went ex in Feb) - sadly they don't keep paying you the dividend just because you owned the shares once upon a time......

Spights,

Barclays newly revised 2026 EPS forecast is USD $0.66 I think, which is exactly where GS were with their first increase about 10 days ago. GS are now upgraded again already to USD $0.84. I think Barclays have upgraded their longer term Brent forecast from $70 to $80 through to the end of 2029.

I am feeling a little giddy. Need to go and lie down in a dark room for a while. I do hope the Straits remain Dire (sorry) for another month or more.

I hold a chunk of June $40 and $42 call contracts on BP ADRs as well as my core UK BP plc holding. The calls are up 447% ad 489% atm. They could be going to 1500% up if we get to your BP target price Spights, and if Strait stays closed for another month then we might well. Fingers and toes crossed. GLA.

Spights I think GS have also raised their EPS forecasts for 2026 and price target for 2nd time in circa 10 days. I think they raised 2026 EPS forecast by 76% circa 10 days ago and have now added another 27% increase for 2026 EPS so that means they have more than doubled their BP 2026 EPS forecast in last 10 days or so. That's how fast this is moving. Price target increased to 590p. If Strait continues at near zero traffic for another 10-15 days there may be further upgrades to come (but that latter is my assumption, not theirs).

IF Iran still retains the capacity to mine the Strait (it is rumoured to have a very large stock of circa 5,000 sea mines), then were the USA to take any naval vessels into the Persian Gulf (Oil tanker escorts anyone) then IF Iran were to heavily mine the strait then those US naval vessels are trapped inside the strait, no exit, just waiting until Iran can hit a decisive blow on the vessel. That would apply to USS Tripoli too. Arguably taking any US or European naval ships into the gulf now is a very high risk choice as they may become semi-permanently trapped. Major amphibious landings anyone?

Stanley,

Over the last 5 years Iran has built a 1000km, 42 inch oil pipeline from Goher to Jask. Goher is in the middle of its oilfields in the SW corner of Iran near the Iraqi border. Jask is on the coast in the Gulf of Oman, outside the Strait. The theoretical capacity of the pipeline is 1m boepd, it cost circa $2bn. It was commissioned and opened... wait for it ... in January 2026. It does not yet have the tank or jetty capacity to match Kharg - It is building more storage tanks. It is currently estimated to be able to load 300k boepd. Given current oil prices vs last year, that 300k boepd might be more valuable to Iran than 1m boepd last year but I am not sure of their cost of production - I should research that.

Yesterday Bessent said that USA is happy to allow Iran to export its oil (from Kharg through the strait) because it is helping supply the market and keep prices down - oh dear - diametrically opposed aims for USA (trying to collapse the regime, or not...).

What all this means IMHO is that USA can take Kharg, or destroy the oil terminal, folowing which Iran can fully mine the strait blocking everyone else in, and yet Iran can still get an increasing amount of oil out. So no, I'm afraid it does not mean Iran will have zero oil revenue. DYOR.

The Kirkuk field in Iraq, which I think is BP's largest Persian gulf / Strait exposure, is set to benefit from the Iraqi Government in discussion with Turkey re exporting via mediterranean port of Ceyhan. Iraqi Government is resurrecting a federal Government pipeline to avoid Kurdish routes north. Should hopefully all be ready to run in about a week (call it 2 weeks?) and run at circa 250k boepd. That will halve BPs volume loss from this Strait shut in of Iraq. Very good news for BP.

Thank you Harmonica for considered responses.

I hope to see December 2026 Brent futures get up toward $100 in next 8 weeks (wishful thinking?) - would mean substantial earnings upgrades for BP.

If Khamenei II is still alive and capable of operating, then I fear USA has already lost this game. If Kharg is seized or oil terminal bombed, Iran just mines the Strait and shuts in at least 10m boepd (15m?), whilst still selling some of their own Iranian oil through their new replacement pipeline, and USA (Bessent) has made clear USA is fine with Iran selling oil as it helps keep downward pressure on prices. Kuwait, Iraq and Qatar screwed completely. Global inflation up, global interest rates up, until IRAN says otherwise. Trump wanted a new FED chairman but I don't think he meant it to be Khamenei junior.

I would really appreciate well informed views on this question of re-opening the Strait:

1.My sense is that both ship owners and their insurers will need a long period (weeks) without a single incident in the Strait before they would put their ships through it ???

2. I think that to secure the Strait the northern shoreline, probably to a depth of 20 miles, needs to be under US control. My sense is that requires divisions not battalions of troops??

3. If Iraq in 2003 had 70,000 republican guards and 25m population and Iran today has 300,000 IRGC and population of 91m of which say 15m plus are islamic fundamentalists, how many troops would be needed on the ground to "safely" secure Iran? I do not think its 2,200.???

I don't know the answers to these questions but they are questions I am trying to answer - anyone have any useful insights / corrections / better ways of thinking of it?

Red,

I fear that is more the north coast of the Strait / Qeshm Island bit it's splitting hairs since neither of them will be very hospitable to US boots.

Physical delivered oil in Japan is now at $146 / barrel. A lot of rumours in financial markets that US Treasury has been selling oil futures to suppress quoted prices. Not confirmed. At $146 / barrel I would imagine Kharg is getting as many VLCCs out as it can before Iran has to finally mine the strait, working on the basis that Trump will either bomb or seize Kharg oil terminal, when the 2200 Marines from the 911 Marine Expeditionary Force arrive. That's circa $300m per VLCC tanker at $150/barrel. Or even load them and get them to Indian ocean and wait for price to surge later, stock on water. I increasingly think Kharg is both a sideshow and a trap for USA. Its all about the Strait, but its useful meanwhile to get some $ out onto the water. Though I do hope for the sake of the marines that they are destined for Kharg and not for the North Coast of the strait.

Dick,

I think the question is whether there is a POO which causes a serious negative overall equity market correction - say -15-20% - in which case probably even oil stocks go down. Logic being high POO = inflation =interest rate increases = market correction. So what is that POO is the question. Some think it is above $125 - I am unsure. I think a major rapid move up on an event (eg sinking of a US navy vessel?) to $150 would be a serious risk to equity markets. That's why I said what we really want is oil drifting around in the $100-$120 range for as long as possible to push up the December 2026 futures and the 2026 full year average oil price.

My view, for what little one persons view is worth, is that the strait needs to be highly secured (not just 'opened up a bit') before tankers owners and insurers will allow them to pass. IMHO that would require the entire northern shore of the strait to be controlled by USA - boots on ground. Horrible situation for the troops involved. The 911 marine unit that is inbound is 2200 men - that's not nearly enough. They might form a bridgehead but securing the entire north shore is a job for entire divisions not just batallions/brigades. Also that 911 Marine unit is circa 15 days away as it is in Philippines. So we could get another month yet. My hope is it all stays relatively calm, with little bits of "fighting" for next month - which should give plenty of time for the price of BP to drift upward with EPS forecast revisions. Overall I think this could last far far longer than market currently thinks to ensure Strait is open.

S&P futures up 19 basis points atm and brent is up so one would like to think BP keeps drifting gently upward. Every week of oil over $100 is increasing the years average oil price and so the increasing BP EPS. Personally I would rather brent spent the next 6 weeks in the $105-$120 range, than that it shot up to $175 on some further military development. More weeks spent over $100 brent have got to be increasing BP EPS.

Fleccy, It is almost more about watching the forward curve and seeing what futures are saying for December 2026 Brent, not the front month. Sell side analysts compare their banks current oil forecast for 2026 to the ytd plus the average of the forward curve for the year. December 2026 is currently around $83. I may be wrong but I think combining ytd actual and forward futures we are somewhere between $90 and $95 for the year atm, which is very good news for BP shareholders. This should mean investment banks start really upgrading their 2026 oil price forecasts and so their EPS forecasts for BP and other oil companies. We shall see, but it is worth watching end of year 2026 futures brent contracts to see where that's going. Pulling up the front end price does tend to pull up the back end though. At least I think that's how it all works, I am not an oils sector analyst. Another 2-3 weeks over $100 at the front end and we should see large EPS upgrades start to come through for 2026. That is just one year though. It has already started but there is much more to go. If I am not wrong I believe GS increased their BP 2026 EPS forecast by over 70% a week or so ago, but I am not certain. DYOR. This is not a recommendation.

Fleccy,

I agree that is absolutely the logical strategic position and mentality of Iranian leadership atm.

Furthermore, on a personal level, a report I read yesterday said that not only did Mojtaba Khamenei lose his Father on the day 1 strike, he also lost:

His Wife, His Mother, One of his Sisters, His brother in Law, His Sister in Law, His nephew, His Niece, And perhaps (unsure yet) one of his daughters all in the same original strike.

I do not remotely support the Iranian regime, I am pro trying to prevent nuclear armed Iran, but at a human level there is a part of me that says this man must be hurting so much that no extremity is too far to go.

So that leaves me agreeing with your position even more strongly Fleccy.

Iran's new Supreme Leader will most likely want to inflict the maximum possible pain on USA and the world (even though it was Israeli strike).

This has all the hallmarks of a very nasty situation.

I am not vouching for the accuracy of the WSJ.

I totally agree with you, I think its a horrible mission - worse even than the idea of having US destroyers and minesweepers escorting oil tankers through the strait. If you're sending in a ground force it had better be well enough planned in advance and large enough and well equipped enough to complete the mission, not just a spur of the moment, knee jerk reaction putting many men in danger. I hope it does not happen in this reactionary kind of way. What USA needs to do know is have a serious re-think and some proper planning and logistics work done.

I wholeheartedly agree - poor leadership, mission design and planning. I also wholeheartedly agree wrt shipping out egregious dissenters . My point, to be clear if I had not made it well, was that I feel sorry for the marines in this situation.

Lead Article - "Pentagon Moves More Marines, Warships to Middle East" -is the front page headline

Front Page of WSJ