The reversal is here! TotalEnergies, which bought 70 ships of crude oil in a frenzy, not only didn't lose money but actually made $1 billion!

French energy giant TotalEnergies made a bold bet on the Middle Eastern crude oil market, ultimately achieving a stunning turnaround with a profit exceeding $1 billion—previously, the market widely believed this all-or-nothing wager would result in significant losses.

According to the Financial Times, a source close to TotalEnergies revealed that the company’s traders bought all available crude oil for May loading from the UAE and Oman in March, totaling 70 cargoes, more than double the purchasing volume in February, resulting in over $1 billion in profits. This scale shocked the market. Adi Imsirovic, a lecturer on energy systems at Oxford University, stated: “This could be the largest single-position bet in the history of the oil market.”

TotalEnergies’ profits were bolstered by its large-scale purchase of physical crude oil while using futures, options, and swaps to hedge risks and bet on rising oil prices. After the blockade of the Strait of Hormuz, Dubai crude prices surged from about $70 per barrel to a record approximately $170, while the international benchmark Brent crude only rose to about $120, with the price differential becoming the core source of TotalEnergies’ profits.

It is noteworthy that just days prior, the narrative circulating in the market was completely opposite—according to a previous article by Wall Street Watch, TotalEnergies had briefly halted bidding last Wednesday, causing Omani futures to plummet by $48 in a single day, and Murban crude fell nearly $20, leading many to believe that the company’s massive long positions would face severe losses. Now, as the full picture of its profits emerges, the outcome of this bet is already clear.

Strait of Hormuz Blockade: Opportunity Window Opens

The starting point of this bet lies in the sudden shift in the situation in the Middle East.

After the U.S. and Israel launched attacks on Iran on February 28, Iran immediately tightened vessel passage through the Strait of Hormuz—this narrow waterway typically carries about one-fifth of the world’s oil supply. As a result, the Platts Dubai crude pricing system faced a direct impact: among the five crude grades covered by this benchmark, three had their export routes blocked in the Gulf. On March 2, the pricing agency Platts promptly announced that it would exclude all crude grades passing through the Strait of Hormuz from its assessment system.

This adjustment sharply narrowed the types of crude available for pricing, leading to a drastic contraction in market liquidity. Market demand quickly concentrated on Murban crude and Omani crude, which are both sour crude oils loaded from ports in the Gulf and unaffected by the blockade. Prices for both surged significantly.

Prior to this, TotalEnergies was already one of the largest traders in the “partial contracts” market for Platts Dubai crude, having strategically positioned itself before the crisis erupted.

Market Control: 70 Cargoes Forge “Historic-Level” Position

The shrinking market liquidity created conditions for a single trading entity to dominate.

Throughout March, TotalEnergies continuously increased its purchases of Dubai crude, ultimately accumulating 70 cargoes for May loading, buying all available crude from the UAE and Oman in the market that month. According to Fabian Ng, head of Asian crude pricing at Argus Media, trading activity in March was about 50% higher than the previous month, but on the buying side, the market was “completely dominated by one company.”

With the number of contracts reduced, the volatility of the benchmark prices significantly increased, making it feasible for a single entity to control market direction. Imsirovic explained:

“Suddenly, the amount of oil available for trading was greatly reduced, making it easier for any contract to be influenced by a particular participant through buying.”

Dubai crude prices continued to rise throughout March, eventually reaching an all-time high of about $170 per barrel, while the international benchmark Brent crude peaked at only about $120 during the same period. Notably, at such high prices, only TotalEnergies managed to accumulate enough “partial contracts” in March to complete the delivery of entire cargoes.

Paper Oil Hedge: The True Source of Massive Profits

Purchasing physical crude oil does not necessarily lead to profits; the true profit logic for TotalEnergies lies in the operations within the “paper oil” market.

The company hedged the risks of its physical oil holdings using derivatives such as futures, options, and swaps, while also betting on rising oil prices with these instruments. Due to the lower transparency of the paper oil market compared to the physical market, it is difficult for outsiders to directly observe the scale and structure of its derivative positions. TotalEnergies declined to comment on this, with a spokesperson stating, “According to company policy, we never comment on trading activities.”

Imsirovic speculated that TotalEnergies’ long positions in the paper oil market were likely much larger than its physical positions:

“I suspect that Total held a significant amount of long paper oil positions when the war broke out and the Strait of Hormuz was closed, and they were quite lucky. Considering the premiums they paid for Dubai crude and assuming their paper oil positions far exceed their physical positions, this is likely the largest position ever established by any single player in the history of the oil market in terms of financial gains.”

Asian Buyers: The Cost of High Oil Prices

TotalEnergies’ profits mean a direct cost shock for Asian crude importers.

Asian buyers who signed long-term procurement contracts based on Platts Dubai crude prices faced purchasing costs significantly higher than the international market average during the surge in Dubai crude prices. According to Argus’ report, some Asian buyers have approached Saudi Aramco, hoping to switch the pricing benchmark from Platts Dubai to ICE Brent crude futures, but were unsuccessful. Saudi Aramco declined to comment on this.

It is noteworthy that just days prior, the narrative circulating in the market was completely opposite—according to a previous article by Wall Street Watch, TotalEnergies had briefly halted bidding last Wednesday, causing Omani futures to plummet by $48 in a single day, and Murban crude fell nearly $20, leading many to believe that the company’s massive long positions would face severe losses. Now, as the full picture of its profits emerges, the outcome of this bet is already clear.

Risk Warning and Disclaimer

        The market has risks; investment requires caution. This article does not constitute personal investment advice and does not consider individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this carries responsibility.