British energy giant BP warned on Friday that its third-quarter profits will be impacted by weak oil sales and refining margins, as global crude demand stalls.
The update follows a similar caution from oil giant Shell, which also expects a drop in margins after oil prices declined due to concerns over Chinese demand and the potential for increased crude production in 2025, said reports.
BP said its refining margins are projected to fall between $400 million and $600 million compared to the previous quarter, while oil trading is expected to be “weak.” The company shared these insights ahead of its October 29 earnings release.
In the third quarter, the price of Brent crude, the international oil benchmark, averaged $80.34 per barrel—nearly $5 lower than the previous quarter. BP attributed the softer prices to an economic slowdown in China, the world’s largest crude importer.
However, oil prices surged in early October due to rising tensions in the Middle East which raised concerns about supply disruptions from the region. Brent briefly surpassed $80 per barrel on Monday, its highest level since late August, as investors reacted to Israel’s potential response to a missile attack from Iran.
BP also noted that its net debt is expected to rise during the quarter, driven by weaker refining margins and a delay in recording approximately $1 billion in divestment proceeds, which will now be booked in the fourth quarter.
In the first half of 2024, BP’s profits plunged by 79%, dropping to $2.13 billion from $10 billion in the same period the previous year.
It has been a challenging year for BP’s Chief Executive, Murray Auchincloss, who has been working to regain investor confidence since officially taking the helm in January.
Auchincloss has shifted BP’s focus back to its core oil and gas operations, recently approving the development of the Kaskida field in the Gulf of Mexico and placing the company’s US onshore wind farms up for sale.
Despite these moves, BP’s share price has underperformed compared to its competitors, dropping more than 12 per cent so far this year.
