BP’s refining business sees lower margins as global oil demand stalls
Both Shell and Exxon Mobil have also warned that lower refining margins will hit profits for the third quarter of the year.
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Your support makes all the difference.BP expects a slump in refining margins to take a 400 million dollar (£306 million) to 600 million dollar (£459 million) chunk out of its third-quarter profit.
The oil major said it also expects oil trading to be “weak” for the three months to the end of September, in a trading statement on Thursday.
BP follows Shell in reporting a drop in margins after the companies’ refining businesses suffered a downturn in global demand recently across both consumer and industrial sectors.
Economic slowdowns in major economies including China, along with a growth in electric car sales, have contributed to the fall.
Refiners have enjoyed bumper profits driven by supply shortages caused partly by Russia’s invasion of Ukraine.
BP and Shell’s US rival Exxon Mobil also flagged last week that lower oil prices and refining margins in the most recent quarter will likely hit its profits for the period.
It comes after a period when oil prices fell significantly this year, with Brent crude futures prices tumbling by more than one-sixth during the third quarter.
The figures do not cover the price rises in recent weeks, which have been driven by renewed military clashes between Israel and Iran, prompting concerns around supply from the Middle East.
BP said its oil production and operations business would also be impacted by lower prices, to the tune of about 100 million dollars (£76 million) to 300 million dollars (£229 million).
The drop reflects “the impact of price lags on BP’s production in the Gulf of Mexico and the United Arab Emirates”, it said.
However, the company upgraded its upstream production guidance for the third quarter, saying it will now be broadly flat versus the previous three months rather than lower.
Third quarter net debt is forecast to rise, partly as a result of the weaker margins and by about one billion dollars-worth of divestment proceeds into the fourth quarter, it said.