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The Times: Strong oil market swells BP profits

The Times: Strong oil market swells BP profits

By Mike Verdin, Times Online

Posted 28 July 04

BP has credited the highest quarter for crude prices in 20 years for a surge in profits and forecast no let up in the strong oil market.

Pre-tax profits at Europe’s largest oil company for the April to June quarter were, at $6.14 billion (£3.33 billion), 81 per cent higher than a year before. On an underlying basis, the earnings rise was 23 per cent to $3.16 billion.

The increase reflected a rise of a third, to $34.47 a barrel, in a year in the price BP achieved for its oil. Production rose by 18 per cent, swollen by flows from the Russian TNK-BP joint venture.

While oil prices have, on the market, yet to regain the $42 a barrel mark reached last month, Lord Browne, the BP chief executive, said that the price the company has gained for its crude has continued to improve in July.

Brent crude futures hit a new eight-week high of $38.60 a barrel in London this afternoon.

The market would remain firm, amid “concerns about supply disruption”, despite efforts by the producers’ cartel, Opec, to raise output.

“Oil prices should remain supported by limited spare Opec production capacity and further oil demand growth,” Lord Browne said.

He also noted a “sharp” increase in margins at BP’s refining and petrol pump division, where profits increased by 43 per cent.

“Low product inventories, strong global oil demand growth and concerns about US gasoline supply were all very supportive,” he said.

BP’s petrochemicals business, which ran up a $25 million loss in the first three months of the year, achieved a $208 million profit, with the return to the black credited to the lack of exceptional factors.

The results, which come ahead of data from Exxon and Shell later this week, received a mixed welcome in the City.

Clay Smith, the Commerzbank analyst, said: “These numbers were bang in-line with our forecasts, but I think some people expect BP to beat consensus.”

Some observers expressed disappointment at a rise to $14 billion in BP’s capital expenditure’s budget, with the increase blamed on the weakness of the dollar.

“This shows cost pressure in the exploration and production division,” Mr Smith said.

BP shares stood 6.5p lower at 483.25p in afternoon trade.

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