Investing.com -- Weak refining margins are expected to hit BP (NYSE:BP)'s third-quarter result by as much as $600 million, underlining the impact of slowing fuel demand and a dip in oil trading returns at the energy giant.
Global oil refiners have been struggling with a weaker demand environment driven in part by ongoing sluggishness in the economy of top importer China and the continuing rise of electric vehicles. Oil prices slumped by 17% in the third quarter.
Meanwhile, new refineries coming online in places like Africa, the Middle East and Asia have also intensified the pressure on the returns of groups like BP (LON:BP) and its peers.
BP has also grappled with investor discontent over its strategy despite the efforts of CEO Murray Auchincloss to revitalize its performance since taking over at the helm of the business in January.
Shares in BP have fallen by 13% so far this year, while the stock prices of rivals like Shell (LON:SHEL) and Exxon Mobil (NYSE:XOM) have risen. Following its trading update on Friday, BP shares had edged lower in mid-morning London trading.
In the statement, BP warned that net debt at the end of the quarter would be higher due to the weaker realized refining margins and by the rephasing of around $1 billion of divestment proceeds into the fourth quarter.
Realizations in its oil production and operations segment are seen denting returns by up to $300 million as well, BP said. Higher exploration write-offs are also tipped to impact earnings by between $200 million to $300 million.
Analysts at Jefferies said the revisions should result in a roughly 10% consensus earnings downgrades for BP in the third quarter from estimates of $2.3 billion. BP is due to report on Oct. 29.
BP reported underlying replacement cost profit, its measure of net income, of $2.756 billion in the second quarter.
(Reuters contributed reporting.)