Demand slumps: Oil price slump and pandemic push bp profit

The Corona pandemic and the fall in oil prices have sharply depressed the profit of the British oil company BP. Adjusted net income in the first quarter decreased to US 791 million US dollars (730 million euros) compared to the same period of the previous year, the Group announced in London.

A year earlier, BP had reported an adjusted profit of just under 2.36 billion dollars. Nevertheless, the company plans to increase its quarterly dividend by 2.4 percent to 10.5 cents per share.

“We are dealing with an exceptionally challenging environment,” said Chief Financial Officer Brian Gilvary. The impact of the declineine in demand and prices is expected to continue in the second quarter. BP will use a series of measures to increase liquidity, strengthen its balance sheet and reduce spending.

At the beginning of April, the company had already announced significant cost reductions: In the current year, organic capital expenditure is to be limited to a total of 12 billion US dollars (approximately 11 billion euros). That’s about 25 percent less than the group had originally planned. Organic capital expenditure is adjusted for effects such as mergers. Among other things, BP wants to manage the situation by improving the integration of individual Group divisions and company sales.

According to the Trade Association for the UK’s Gas and Oil Industry, Oil and Gas UK, 30,000 workers could lose their jobs in the next 18 months as a result of the pandemic and the fall in prices. That equates to about one in five jobs in the uk sector, according to a survey by the association.

Last week, the global oil market had become unique: for the first time in history, the price of a futures contract on US oil had slipped into negative territory – meaning that buyers would even receive money when they fell. This, too, was the result of an unprecedented drop in demand due to the Corona crisis and far too high a supply of crude oil in the absence of storage capacity.

The Organization of Petroleum Exporting Countries (Opec) and its partners had agreed in mid-April to curb the price of oil because of the pandemic.