BP predicts tight gas markets this winter as rising prices boost

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BP has predicted that gas markets will remain tight this winter, after rising oil and gas prices lifted the energy giant’s earnings.

BP beat City forecasts this morning by posting underlying profits of over $3.3bn for the last quarter, due to higher oil and gas prices and refining margins and strong trading results.

And with the global economy facing an energy crunch, BP says:

Gas markets were very strong in the quarter and we expect they will remain tight during the period of peak winter demand.

BP also predicts that oil prices will be boosted by this dash for gas, with Brent crude already at a three-year high around $85 per barrel.

Oil prices have continued to increase, and inventories have reduced back towards pre-pandemic levels. We expect oil prices to be supported by continued inventory draw-down, with the potential for additional demand from gas to oil switching.

OPEC+ decision making on production levels continues to be a key factor in oil prices and market rebalancing.

Rising energy prices lifted BP’s underlying replacement cost profit (its preferred measure of earnings) to $3.322bn for the third quarter of the year.

That’s 18% up from $2.798bn in Q2, and ahead of forecasts of around $3.06bn.

That’s sharply higher than the $86m profit a year earlier, in July-September 2020 when BP was recovering from the economic shock of the pandemic.

BP’s chief executive, Bernard Looney, says:

This has been another good quarter for bp – our businesses are generating strong underlying earnings and cash flow 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.

On a statutory basis, BP actually made a loss of $2.5bn — which it says is due to the way that hedges used to risk-manage its liquified natural gas contracts are accounted for…..

Wholesale gas prices soared this year during the energy price crunch. The cost of next-day UK delivery surged…