UK oil majors set to follow in Exxon Mobil's footsteps and post profit surges after lift oil price rally

Francesca Washtell
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BP will report tomorrow and Shell on Thursday (Source: Getty)

Oil majors BP and Royal Dutch Shell are set to unveil robust first quarter profits this week, boosted by a surge in oil prices since late November.

BP, which reports tomorrow, is expected to announce underlying profits have more than doubled from $532m (£411m) in the first quarter of 2016 to £1.26bn this year.

On Thursday, Shell investors are poised for first-quarter profits of $3.05bn, following a loss of $460m at the start of last year.

Read more: Exxon Mobil's profit more than doubled on the back of rallying oil prices

BP and Shell’s profit boom follows stellar results from US group Exxon Mobil last week. Rising crude prices helped Exxon more than double quarterly profit to just over $4bn, despite production falling four per cent.

Brent crude oil prices averaged around $54 per barrel in the first quarter of 2017, compared with just under $34 a barrel in the same period last year, according to data from the US Energy Information Administration.

Analysts had hoped prices would reach around $60 per barrel after the Organisation of the Petroleum Exporting Countries (Opec) agreed to cut production at the end of November and a second agreement with non-Opec producers in December promised to cut production by a combined 1.8m barrels per day, in an effort to rebalance prices.

Read more: Peak oil demand is still decades away, says the boss of Saudi Aramco

However, the rally has been undercut by a rise in US stockpiles and a boom in the country’s shale industry.

Analysts will be watching BP and Shell’s cashflows closely. BP in February said it would need oil prices to average $60 to balance its books this year.

Recently BP has agreed to offload its stake in a Chinese petrochemical firm for $1.7bn, its Forties pipeline system to Ineos and announced it had cut boss Bob Dudley's pay by 40 per cent, but in the first quarter it also made a number of investments.

Read more: 2017 will be another year of low oil discoveries after they plunged in 2016

In a divestment drive, Shell has recently offloaded its Canadian oil sands assets, agreed to sell nearly half of its less profitable North Sea assets for $3.8bn and flogged Gabon-based assets to a Carlyle Group-backed firm for $587m.

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