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Oil giants BP and Shell set for slump in profits

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Rival Royal Dutch Shell puts out its third-quarter numbers on Thursday, with analysts at Deutsche Bank warning that they are viewing the update with ‘continuing trepidation’ after a disappointing second quarter. 

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PUBLISHED: 21:37, 27 October 2013 | UPDATED: 08:03, 28 October 2013

BP will this week raise its estimate of how much the 2010 Gulf of Mexico spill will cost it as the oil giant and rival Shell report a slump in profits.

Lower refining margins are expected to eat into profits at both firms, while BP will see earnings hit by asset sales and Shell is set to feel the effect of fresh outages in its Nigerian operation.

City analysts expect BP, which will report its third-quarter results tomorrow to deliver ‘clean’ profits – stripping out the effect of oil price movements – of £2bn, down 37pc on last year.

Its performance in the same quarter of 2012 was boosted by record high oil refining margins, which will not be repeated this year.

The oil giant is still fighting a legal battle in the US that will determine its bill for the Gulf of Mexico oil spill.

It is expected to raise its total estimate from £26.2bn, amid a flood of compensation demands, despite its efforts to block some claims it deems to be ‘fictitious’.

A New Orleans court will determine early next year the full scale of any environmental penalties for the 2010 disaster.

Rival Royal Dutch Shell puts out its third-quarter numbers on Thursday, with analysts at Deutsche Bank warning that they are viewing the update with ‘continuing trepidation’ after a disappointing second quarter.

It is also expected to feel the effect of lower refining margins, while maintenance in the North Sea and Brazil will add to its woes in Nigeria, where oil theft has hit production. Investec expects the firm to report third-quarter net earnings down 25pc at £3.1bn.

BG, the oil and gas explorer spun out of British Gas, is expected to report a 20pc fall in quarterly net profit to £584m when it reports on Thursday.

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