London — 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 $600 million, the British oil major said on Friday.
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 $2.756 billion.
Rival Shell on Monday also warned of slump in refining profit margins and weak oil product trading in the third quarter, while U.S. oil major Exxon Mobil (XOM.N), opens new tab said last week that a slump in oil prices was set to hit its third-quarter profit.
Oil prices fell by 17% in the third quarter, the largest quarterly decline in a year, on worries about the global oil demand outlook. Brent futures settled at $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.
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%, while shares of Shell and Exxon have gained nearly 1% and 23%, 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 $100 million to $300 million.
*Arunima Kumar; editing: Jan Harvey, David Evans & Kim Coghill – Reuters
