BP's Q2 2026 Earnings Outlook: Higher Oil Prices and Improved Refining Margins Trump Production Decline

Refining Margins and Trading: Another Strong Quarter

BP's downstream operations are also performing well. Stronger refining margins are expected to lift earnings in BP's products business by $1.2 billion to $1.4 billion ^R. The company stated its oil trading result is expected to be "slightly higher" than Q1 2026 ^S.

This follows an exceptional Q1 2026, where the customers & products division — which includes refining and trading — saw RC profit before interest and tax surge to $2.45 billion, up from just $103 million in Q1 2025 ^OS. In Q1, BP's refining availability reached 96.3%, above the company's 96% target ^S.

Upstream Production: A Definite Step Down

The positive price story is partially offset by lower production volumes. BP guided that reported upstream production for Q2 2026 would be 2,170 to 2,220 mboe/d, down from 2,339 mboe/d in Q1 2026 ^EIM.

This decline is attributed to two main factors:

• Seasonal maintenance, predominantly in the Gulf of America ^EI
• The effects of disruption in the Middle East ^EI

In Q1 2026, higher production in the Gulf of America and strong performance from bpx Energy had partially offset Middle East disruptions, keeping overall production broadly flat ^PIO. That offset is not expected to repeat at the same level in Q2 ^E. BP has also lowered its full-year 2026 upstream production guidance due to the Middle East effects ^Q.

The Write-Down and Other Financial Metrics

Alongside the positive earnings drivers, BP flagged a write-down of around $1 billion (£740 million) for Q2 2026 ^S. This is an impairment or exceptional charge that will be booked alongside the quarterly results.

The company has reiterated its commitment to capital discipline despite the volatile environment. FY26 capital expenditure guidance remains at $13–$13.5 billion ^IQ.

BP's Q1 2026 underlying replacement cost (RC) profit was $3.2 billion, a 128% year-on-year increase, beating consensus estimates of $2.67 billion ^RO. The stock closed at $40.85 on July 13, 2026, up 4.22% on the day ^M.

Summary of Key Factors

Broader Market Conditions and Vulnerabilities

While the oil price tailwind is powerful, the underlying situation remains fragile. Fuel margins and production forecasts remain vulnerable as long as the Iran conflict persists ^ER. BP has stated that fuel margins will "remain sensitive" to supply costs and regional conditions in the Middle East ^R.

BP's gas and oil production segments fell short of expectations in Q1, and analysts see continued downside risk to upstream volumes ^ER. The company also noted that heightened volatility in oil and gas prices could impact production-sharing agreement (PSA) contracts ^RM.

Bottom line: BP's Q2 2026 earnings are being lifted by the Iran-conflict-driven oil price spike and robust refining/trading margins — enough to overcome a sequential drop in upstream production and a ~$1 billion write-down. The full picture will be clear when BP reports actual results around August 4, 2026 ^MS.