Oil price boost should see BP Q1 profits gush

The 25 per cent-plus rise in oil prices seen since the start of 2021 should help BP’s profits surge when it reports first-quarter results this week.

Analysts expect the company's replacement cost profit, its preferred measure, to reach £1.2 billion compared to £569 million in the same period last year.

Since the start of the year the price of a barrel of Brent crude oil has risen strongly and has trebled since a low point a year ago.

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Steve Clayton, manager of the HL Select Funds, said: "With oil prices having built on their 2020 recovery throughout the first three months of the year, BP should have had a reasonable trading environment to report when it posts first-quarter numbers."

BP has benefited from rising oil prices in the first quarter of the year. Picture: contributed.BP has benefited from rising oil prices in the first quarter of the year. Picture: contributed.
BP has benefited from rising oil prices in the first quarter of the year. Picture: contributed.

The price of Brent averaged around $61 (£44) a barrel in the first quarter, compared to $44 a quarter earlier, and $50 in the first three months of 2020.

However, shares in BP and rival Shell, which also reports next week, have not bounced back as strongly as many expected.

BP's shares have only gained 16 per cent since their worst days in March 2020 and are still more than 40 per cent down from their pre-pandemic levels.

Shell, which in January announced it was cutting 300 Aberdeen jobs, meanwhile is up just 27 per cent from March 2020 and also around 40 per cent down since January 2020.

AJ Bell investment director Russ Mould said investors are “clearly sceptical” over the two majors’ shift to a lower carbon business model.

The companies' share prices will also not have been helped by cutting dividends, the first time since the Gulf of Mexico oil spill for BP, and the first time since the Second World War for Shell.

"Some contrarians may see this as an opportunity, given how sentiment toward the sector is so washed out, how badly the stocks have performed, the possibility of an economic upturn, and the likelihood that oil will be with us as a primary source of energy for some time to come, whether we like it or not," Mr Mould said.

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He added that analysts will also focus on BP's production figures when the results come out on Tuesday.

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