Oil boom to push up BP profits

RECORD profits at BP are set to get even bigger after the oil and gas major revealed its latest figures showing the price of Brent crude stood well over $50 a barrel for the whole of the last quarter and up by a whopping 46% year-on-year.

In a second-quarter trading update, the company said the price of oil, from which it will be making most of its profits, averaged $51.63 a barrel - more than 8% higher than in the first three months of the year and compared with an average of $35.32 per barrel in the April-June trading quarter of 2004.

In the first quarter of 2005, the soaring oil price saw BP report a profits surge of 29% to $5.49bn (£3.1bn), the equivalent of profits by BP of £1.3m an hour or £370 per second.

Those figures look likely to surge even higher in the second quarter.

BP, which is headed by Lord Browne, tells analysts that for every $1 rise in the price of oil per barrel, the company makes an extra $500m a year. With the price of Brent crude running at just $4 per barrel more over the last three months, that suggests oil profits will be roughly $500m stronger in the second quarter of the year.

However, the picture is not quite so strong from BP's gas business. The benchmark Henry Hub gas price in the US is up 8% quarter-on-quarter, 12% better than a year ago.

UK gas prices, though, have slipped from the heights touched during the first quarter of the year. The price of UK gas in the second quarter averaged 30.15p a therm, 45% higher than where it was a year ago but down 20% quarter-on-quarter.

BP production levels continue to run at similar levels to the first quarter. For the first three months of the year it pumped 4.101m barrels per day, and said it expects average production to continue at between 4.1m and 4.2m barrel per day.

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It is anticipated that as the pace of growth at its Russian joint venture begins to slow, so production will be ramped up later in the year when new fields in the Gulf of Mexico go on stream.

While the oil price rise is squeezing the wallet of the motorist, it is nothing but good news for the BP shareholders as the company uses its excess cash to buy back and cancel shares. This allows it to have a smaller share base and pay ever-rising dividends. In the second quarter it said a further $2.1bn of shares were bought back.

The soaring oil price and resulting surge in BP profits has driven the shares to a three-year high, opening today at 617p, a rise of 30% over the last 12 months and increase of nearly 75% from their low in early 2003.

Crude on climb as US hits road

OIL prices headed back toward last week's $60-a-barrel levels amid growing worries about high consumption by Americans during their long holiday weekend.

Many families in the US pile into their cars during the Independence Day break, causing a leap in petrol usage and draining crude oil reserves.

Friday saw a $2.25 surge in the price of New York crude in anticipation. With the Nymex market closed yesterday, prices crept up again today, gaining 33 cents to $59.08 a barrel.

All eyes will be on tomorrow's weekly update on US crude oil reserves. Last week, stockpiles rose - a relief for industry and politicians and the oil price plummeted. Long term, however, investors see little reason for crude to fall significantly.

The Opec oil producing countries say last week's 500,000 barrels-a-day increase was the maximum they could do, while concerns still remain about high consumption ahead during the northern hemisphere winter.