Weak refining margins and weaker oil trading results are expected to dent BP’s third-quarter profit, the UK-based supermajor warned on Friday.
BP is yet another oil major to flag weakness in their refining business for the past quarter, following warnings from Shell and ExxonMobil.
Compared to the second quarter, BP expects its Q3 results to have been dented by weaker realized refining margins and a weak oil trading result. The lower refining margins are expected to hit earnings by between $400 million and $600 million, the company said in a trading statement ahead of the Q3 results set to be published on October 29.
In the oil production and operations segment, BP expects lower earnings by $100 million-$300 million, including the impact of price lags on the company’s production in the Gulf of Mexico and the UAE. Higher exploration write-offs are also expected to have a negative impact of up to $300 million.
BP also sees its net debt at the end of the third quarter to be higher, driven primarily by the impact of weaker realized refining margins and by the re-phasing of around $1 billion of divestment proceeds into the fourth quarter.
The BP announcement follows the one from Shell earlier this week, in which the other UK-based supermajor said it expects lower refining margins and a loss in its chemicals business to weigh on its third-quarter earnings. These could be offset or partly offset by higher LNG production volumes, Shell said in its third quarter update note.
Falling refining margins have already hit the second-quarter earnings of the supermajors, and further declines in Q3 are expected to continue to weigh on the profits.
The refining industry is witnessing the end of the supercycle of huge profits and record margins that began with the post-pandemic surge in demand and the war- and sanctions-related supply disruptions.
Last week, another supermajor, ExxonMobil, warned that its third-quarter earnings would likely be affected by lower oil prices, with the impact in the range of $600 million to $1 billion.
By Tsvetana Paraskova for Oilprice.com
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