BP’s Q2 Profits to Be Impacted by ‘Significantly Lower’ Refining Margins

BP's (LON: BP.) second-quarter profits are expected to be hit by a significant drop in refining margins despite a rise in oil prices.

In its latest trading update, the company predicted a negative impact of $0.5-$0.7 billion due to weaker middle distillate margins and a narrower price gap between heavy crude oil and lighter grades in North America. This comes after a strong first quarter for refining.

Overall, BP said its upstream production (oil and gas extraction) remained flat compared to the previous quarter. However, oil production and operations are expected to see a positive impact of $0.1-$0.3 billion due to pricing advantages.

The company also expects stronger performance in its customer service and convenience store operations.

BP's gas trading is expected to be average after a strong first quarter, while oil trading is forecast to be weak. Additionally, the company anticipates non-cash charges of $1-$2 billion related to asset impairments and contract reviews.

Furthermore, upstream production in the second quarter is now expected to be broadly flat compared to the prior quarter, “with production broadly flat in oil production & operations and slightly lower in gas & low carbon energy.”

BP's full second-quarter results are expected to be released on July 30, 2024.

BP's trading update follows a similar update by Exxon Mobil. The oil giant said in a filing on Monday that lower natural gas prices and refining margins are also expected to hit its second-quarter earnings.