TotalEnergies Navigates Hormuz Crisis with Discounted Oil and Strong Trading Economics

TotalEnergies SE (NYSE: TTE ) is showing that its trading and integrated business model can create opportunities even in a highly disrupted oil market. CEO Patrick Pouyanne said the company is still profitably moving crude through the Strait of Hormuz because Middle Eastern producers are offering oil at steep discounts to compensate buyers for the risks and higher transportation costs. Crude from Iraq and Qatar is reportedly being sold for around $50-$60 a barrel, while Brent was above $90, more than offsetting the roughly $10-a-barrel additional cost of moving a VLCC through Hormuz.

The situation is particularly favorable for TotalEnergies SE (NYSE:TTE) because of its large trading operation and integrated asset base. The company has already demonstrated its ability to capitalize on Middle East market dislocations; Reuters reported that TotalEnergies made more than $1 billion from major Middle Eastern crude trades earlier this year after its traders anticipated the worsening regional situation.

At the same time, TotalEnergies recognizes that relying on Hormuz is not sustainable. The company plans to invest in alternative export infrastructure, including the Baghdad-Syria pipeline and an expansion of the UAE's Habshan-Fujairah pipeline. The existing Fujairah route can handle around 1.8 million barrels per day, with the UAE aiming to double its capacity.

The biggest bullish argument is that TotalEnergies SE (NYSE:TTE) is turning a major geopolitical disruption into a trading opportunity. While many producers and refiners are struggling with disrupted logistics, TotalEnergies' trading arm can source heavily discounted crude and still transport it profitably. A crude price of $50-$60 per barrel versus Brent above $90 creates a substantial pricing cushion, even after the additional transportation cost.

TotalEnergies' integrated business model is another advantage. The company is not simply dependent on producing oil; its trading, refining, transportation, and downstream operations give it more flexibility to exploit price dislocations across the energy market. Its earlier Middle East trading gains, which Reuters said exceeded $1 billion, provide evidence that the company can monetize volatility rather than simply suffer from it.

There is also a potential downstream benefit. While crude is moving through Hormuz at discounted prices, refined products are facing much higher transportation costs, with Pouyanne estimating an additional $50 per barrel in some cases. That has created shortages of refined products and a much stronger products market. For an integrated energy company such as TotalEnergies, stronger refining margins could help offset pressure elsewhere in the business.