BP has warned that its profits are likely to be weaker than expected due to lower refining margins and a deterioration in performance in the oil trading division.
The company announced on Tuesday that "significantly lower realized refining margins" will subtract between 500 and 700 million USD from the second quarter results, which are to be released at the end of the month.
The grim outlook for the refinery business reflects the situation at ExxonMobil, which also indicated on Monday that lower margins in the industry would weigh on second-quarter profits.
Analysts at Jefferies expect BP's quarterly results to be about 20 percent lower than anticipated, given the company's updated forecast.
RBC Capital Markets has lowered its estimates for BP's net profit for the second quarter from $3.3 billion to $2.7 billion.
The BP shares fell by 4 percent to 453.80 pence in early afternoon trading in London.
The lowered profit forecast comes at a time when CEO Murray Auchincloss is trying to regain investor confidence after being permanently appointed to the top position in January.
The former CFO, who succeeded Bernard Looney last year, missed analysts' profit estimates in the first quarter after promising to focus on shareholder returns.
We just have to be pragmatic. We have to deliver the promised returns, otherwise we won't be able to advance any projects," he said in May.
BP stated that the result of the oil trading business is expected to be "weak" after a strong first quarter, while gas trading is expected to be "average.
Refinery margins in the second quarter were significantly weaker for middle distillates, which include jet fuel, diesel, and lighter heating oils, according to BP.
The company added that it will take a write-down of up to $2 billion in the second quarter due to a plan to reduce its refining capacity at the Gelsenkirchen refinery in Germany.
BP announced in March that it would reduce crude oil processing capacity at the refinery by about one-third by 2025, due to weaker demand forecasts. The facility, built in 1935, has a processing capacity of 265,000 barrels per day.
The announcement by BP follows the warning from competitor Shell last week about non-cash write-downs of up to 2 billion US dollars in the second quarter related to the sale of its chemical plant in Singapore and the construction halt on one of Europe's largest biofuel plants in the Netherlands.
