- Oil and gas output up
- Trading division strong
- Brent crude back at $90
Shares in energy producer BP (BP.) rose 1.8% to a new six-month high of 519p after the firm raised its guidance for upstream production and Brent crude prices extended their recent rally.
POSITIVE ON BALANCE
BP’s first-quarter guidance was mixed but on balance the market looked to the positives including a stronger upstream performance and higher refining margins.
Production of crude oil, natural gas and low-carbon energy is expected to be higher than the final quarter of 2023, while gas marketing and trading is expected to repeat the prior quarter’s strong performance.
Oil trading is also expected to be strong, while realized refining margins of $20.60 per barrel against $18.50 per barrel in the fourth quarter should yield an additional $100 million to $200 million of revenue.
Against this, a devaluation in the Egyptian pound, price lags on production in the Gulf of Mexico and UAE and declines in non-Henry Hub natural gas prices are seen having an adverse impact on revenue.
The firm also noted net debt had increased during the quarter reflecting a working capital build together with phasing of capex and divestments, and it expected to take another $1.2 billion of pre-tax provisions – most of which will fall into the second quarter – for the Deepwater Horizon oil spill in the Gulf of Mexico more than a decade ago.
CRUDE HEADING TO $100?
Although Brent crude averaged $83.16 per barrel in the first quarter against $84.34 in the previous quarter, the last few weeks have seen the price spike back above $90 due a combination of supply-side constraints and geopolitics and some commentators are suggesting it could top $100 per barrel in the near future.
On the one hand, Mexico has cut exports to the US by a third, which means the US – which is now the world’s largest oil producer – is having to consume more of its domestic output and export less.
On the other, Iraq and Qatar have cut production and the UAE (United Arab Emirates) has diverted more of its output to domestic refineries meaning there is less crude on the market.
At the same time, tankers carrying oil and gas from the Far East to Europe are having to go around the southern tip of Africa rather than use the Red Sea due to rebel attacks which is delaying supplies and adding to the pinch.
The US EIA (Energy Information Administration) estimates global oil inventories will decline by 900,000 barrels per day in the second quarter against its previous forecast of no change.
This represents the first decline in inventories since 2021 and comes just as US refineries gear up to produce more gasoline ahead of the US ‘driving season’, adding to the upward pressure on prices.
