Oil giant BP will need crude oil prices to climb to between $50-$55 per barrel to rebalance its business costs after months of low oil prices cut profits significantly, beginning in the final quarter of last year.
In its first-quarter financial report released Tuesday, the oil company focused on increased belt-tightening as it waits for the oil market to rebalance, hopefully by this time next year, company officials said.
Bob Dudley, BP group chief executive, said the company is optimistic that the oil market will reset later this year, as supply and demand rebalance, resulting in higher prices.
“Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets closer into balance by the end of the year,” Dudley said.
But the company continues to look for ways to cut costs as it awaits for prices to inch higher and will make more cuts if need be, said Brian Gilvary, chief financial officer.
Crude oil prices averaged $34 a barrel in the first quarter, compared with $54 a year earlier. In the second quarter, the Brent oil market price is averaging $40.
For the first three months of the year, BP posted operating profits of $532 million, a steep drop from the $2.6 billion a year ago.
However, the company continues to take a hit from the 2010 Deepwater Horizon oil spill in the Gulf of Mexico that saw 11 people killed. BP took a $900 million charge related to the oil spill in the quarter, bringing total cumulative charges related to the disaster to $56.4 billion. With the charge, the company posted a loss of $485 million in the quarter.
The company says it is not possible to reliably estimate its remaining liability, as it continues to review its claims quarter-to-quarter.
