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BP has warned that its refining business was significantly less profitable in the second quarter and that it will also be marred by a weak performance from its oil trading division.
The company said on Tuesday that “significantly lower realised refining margins” would wipe between $500mn and $700mn from its second-quarter earnings, which are due to be released at the end of the month.
The depressed picture for refining margins echoes that of ExxonMobil, which on Monday said that lower refining margins would hurt its second-quarter profits.
Analysts at Jefferies said that the disclosure from BP should “result in [up to] 20 per cent earnings downgrade” for the second quarter.
BP said the result from its oil trading business “is expected to be weak” following a strong first quarter while gas trading is expected to be “average”.
BP shares dropped more than 3 per cent in early trading on Tuesday.
The group added that it would take an impairment of up to $2bn in the second quarter stemming from a plan to scale back its refining operations at its Gelsenkirchen refinery.
BP said in March that it planned to reduce the crude oil processing capacity at the refinery by about a third from 2025, owing to a weaker demand outlook. Built in 1935, the plant currently has a processing capacity of 265,000 barrels a day.
BP’s announcement comes after rival Shell last week warned of non-cash impairments of up to $2bn in the second quarter, relating to the sale of its chemicals plant in Singapore and the pause of construction at one of Europe’s largest biofuel plants in the Netherlands.
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