London - BP's chief executive has warned that oil prices will be “lower for longer” as he revealed that falling prices and a further multibillion-dollar charge relating to the Gulf of Mexico disaster had fuelled a $6.3bn (£4bn) loss for the second quarter.
Speaking as oil hit a near six-month low on Tuesday, Bob Dudley cautioned that the price looked set to remain around its recent depressed level for the foreseeable future - although he would not be drawn on when he thought it would rebound.
The price of oil has tumbled as a slump in the Chinese stock market raises concerns about global demand, compounding fears that a recent agreement to relax export restrictions on Iran could further increase the glut in supply that was created by the US shale oil boom.
“We hold the view that oil prices will be lower for longer,” Dudley said on Tuesday.
“If you look at the impact of what could be increasing Iranian production next year, slower Chinese growth... and if you take the three largest oil producing areas on the planet - the US, Saudi (Arabia) and Russia - all their production is rising,” he said.
Brian Gilvary, the chief financial officer, said he did not expect the full impact of the agreement to allow Iran to boost oil exports to be felt until next year. The resulting increase in supply is expected to depress global prices. However, the declining oil price was not all bad, BP stressed. The slump had significantly reduced the cost of equipment such steel pipelines and deep-sea rig rentals, making it easier for companies to cut capital expenditure, Dudley said.
He said BP was keen to exploit any opportunities that Iran might offer, but cautioned that it was still some way from making a return to the country.
“If - and it's still a big if - sanctions are relaxed in a way that allows us to work from there we would obviously (consider it). We are not actively in that phase. I think that the agreements, as laid out, are quite complicated, and actually no one really knows all the details yet. But as a company who works all over the globe, it would be natural for us,” he said.
Despite the latest loss, he said the company was in good shape after drawing a line under most of the outstanding claims from the Gulf of Mexico oil spill in 2010 and cutting investment spending.
BP reported a replacement cost loss - which takes into account changes in the oil price - of $6.3bn for the second quarter. This compares with a $2.1bn profit in the first quarter and $3.2bn in last year's second quarter.
The figure was dragged down by a $10.8bn charge relating to the Gulf of Mexico rig explosion and oil spill in 2010, which killed 11 workers and has so far cost the company $54.6bn.
The latest charge relates to a recent agreement between BP and the US government and five states that settles most outstanding legal cases relating to the spill.
BP's bottom line was also hit by the falling oil price - which averaged $62 a barrel in the second quarter, down from $110 a year earlier. Brent fell as much as $119 a barrel to $52.75 at one point on Tuesday, leaving it nearly 20 percent lower than at the start of the month. Analysts said pump prices would probably fall from their current level of about 117p a litre for petrol and 118p for diesel if the low oil price persisted.
A reduced contribution from its holding in the Russian oil company Rosneft and a one-off charge relating to problems in Libya also took their toll. Stripping out the Gulf of Mexico costs and other one-off items, BP reported a 64 percent decline in underlying replacement cost profit to $1.3bn in the second quarter.
The Independent