Weak refining margins due to a slowdown in global demand for fuel and lower oil trading results will dent BP’s third-quarter profit by up to US$600 million, the British oil major said on Friday (Oct 11).
Global oil refiners are facing a drop in profitability to multi-year lows, marking a downturn for an industry that had enjoyed surging returns post-pandemic and underlining the extent of the current demand slowdown.
BP’s second-quarter underlying replacement cost profit, the company’s definition of net income, was US$2.756 billion.
Rival Shell on Monday also warned of a slump in refining profit margins and weak oil product trading in the third quarter, while US oil major Exxon Mobil said last week that a slump in oil prices was set to hit its third-quarter profit.
Oil prices fell by 17 per cent in the third quarter, the largest quarterly decline in a year, on worries about the global oil demand outlook. Brent futures settled at US$71.77 a barrel on the last trading day of the quarter.
BP’s earnings snapshot comes as CEO Murray Auchincloss scales back the firm’s energy transition strategy to regain investor confidence.
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Auchincloss took the helm in January but has struggled to stem the drop in BP’s share price, which has underperformed its rivals so far this year as investors question the company’s ability to generate profits under its current strategy.
Year-to-date, BP’s stock has fallen almost 12 per cent, while shares of Shell and Exxon have gained nearly 1 per cent and 23 per cent, respectively.
BP, which is set to post its quarterly results on Oct 29, said its upstream production in the third quarter is expected to be broadly unchanged from the prior three months.
In the second quarter, BP’s total hydrocarbons production stood at 899,000 barrels of oil equivalent per day (mboe/d).
The London-listed company said in the oil production and operations unit, the third-quarter result will be impacted by US$100 million to US$300 million. REUTERS
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