Home / US & World / BP warns over ‘tight’ winter gas markets as it beats profit forecasts

BP warns over ‘tight’ winter gas markets as it beats profit forecasts

<span>Photograph: Martin Godwin/The Guardian</span>
Photograph: Martin Godwin/The Guardian 

BP has warned that gas markets will remain “tight” during the winter period of peak demand, as rising energy prices drove it to a higher-than-expected quarterly profit.

Oil and natural gas prices have soared this year because of rising demand as economies recover from the Covid-19 pandemic and tight supply.

The company reported a profit of $3.3bn (£2.4bn) for the third quarter, beating analysts’ expectations of $3.1bn. It compared with a $2.8bn in profit in the second quarter and $86m a year earlier, when energy demand and prices collapsed due to the coronavirus epidemic.

Related: BP predicts tight gas markets this winter as rising prices boost profits – business live

The BP chief executive, Bernard Looney, said: “This has been another good quarter for BP – our businesses are generating strong underlying earnings and cashflow while maintaining their focus on safe and reliable operations.

“Rising commodity prices certainly helped, but I am most pleased that quarter by quarter, we’re doing what we said we would delivering significant cash to strengthen our finances, grow distributions to shareholders and invest in our strategic transformation. This is what we mean by performing while transforming.”

The company added: “Gas markets were very strong in the quarter and we expect they will remain tight during the period of peak winter demand.”

Prices of wholesale gas have soared because of low storage levels after an especially cold winter in Europe last year and increased energy demand from Asia. The cost of gas for delivery in November hit an all-time high of 407p a therm in early October, though has since fallen back. In December last year it was just 45p.

Oil prices have also climbed, and inventories have fallen towards pre-pandemic levels, BP noted. It expects oil prices to be underpinned by a further decline in inventories and possibly additional demand from gas to oil switching. It said that decisions taken on production levels by the Opec+ oil cartel of big producers including Russia continued to be an important factor in oil prices and market rebalancing. Brent crude is now trading at about $85 a barrel.

Last week, Larry Fink, the chairman and chief executive of BlackRock, the world’s biggest fund manager, warned that there was a “high probability” of oil hitting $100 a barrel.

BP expects both oil and gas production in the fourth quarter to be higher than in the third, as it ramps up big projects, particularly in gas regions, and recovers from seasonal maintenance and the impact of Hurricane Ida on production in the Gulf of Mexico.

For 2021 as a whole, BP expects production to be lower than 2020 because it is selling off unwanted assets worth $6bn to $7bn.

The company is making payments relating to the Gulf of Mexico oil spill in 2010 of about $1.5bn before tax this year.

It plans a further $1.25bn share buyback after a $1.4bn buyback completed on Monday.

Credit belongs to: https://ca.sports.yahoo.com

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