BP’s stock gains after sharp rise in Q2 profits

The news shaping the markets today

Russia’s military forces fired mortars hitting an evacuation bus in Ukraine’s southern Kherson region, killing three people and leaving five wounded. Despite the ongoing unrest, the US dollar index traded slightly lower this morning.

China’s general services PMI rose to 55.5 in July, from 54.5 in June, lending some support to the CNY/USD forex pair.

Australia’s retail sales grew 0.2% to a new record of A$34.24 billion in June, following a 0.7% rise in May. The news sent the AUD/USD pair higher in forex trading this morning.

Singapore’s S&P Global PMI rose to 58.0 in July, from 57.5 in the previous month. The latest reading signalled the 20th straight month of growth in the private sector, lending support to the SGD/USD forex pair.

Japan’s services PMI was revised lower to 50.3 in July, versus a flash reading of 51.2. However, the country’s services activity expanding for the fourth straight month sent the JPY/USD pair higher in forex trading this morning.

What’s happening: Shares of BP PLC rose on Tuesday, after the company reported better-than-expected profits for the second quarter.

What happened: BP became the latest oil giant to record its most profitable quarter in several years, joining peers like Exxon Mobil and Chevron, which have benefited from rising oil prices.

The expansion in refining margins helped the company increase shareholder returns.

How were the results: The London-based company reported a significant growth in both sales and earnings for the second quarter.

• Total revenues jumped 85% to $69.5 billion in the second quarter.
• Underlying replacement cost profits climbed to $8.45 billion, from $6.25 billion in the prior quarter and $2.8 billion in the year-ago period. The figure came in higher than the consensus estimate of $6.8 billion.

Why it matters: Oil and gas majors have been raising their returns to shareholders, supported by an increase in cash, given rising oil prices due to the ongoing energy crisis caused by the Russia-Ukraine war. BP said oil prices could remain elevated for some time.

BP’s adjusted net income surged to the strongest level since 2008, easily surpassing market expectations, with rising crude and natural gas prices resulting in strong margins earned by its refineries.

The adjusted EBITDA (earnings before interest, taxation, depreciation and amortization) from its refining and trading unit jumped to $3.73 billion, from just $301 million in the year-earlier quarter.

BP announced plans to repurchase shares worth $3.5 billion over the next three months, in addition to the $3.8 billion buyback in the first half of the year. The company also boosted its dividend by 10% to 6.006 cents per share, higher than its earlier guidance of a 4% increase through 2025.

How shares responded: BP’s London-listed shares climbed 3.6%, while the US-listed shares gained 1.1% to close at $29.36 on Tuesday, after the release of quarterly earnings. The stock has lost around 9% over the past six months.

What to watch: Investors will keep an eye on oil and natural gas prices and any news related to Russian supply disruptions and decline in inventories at the largest consumers, like the US, China and India.

The markets today

Crude oil will be in focus today ahead of the next OPEC+ (Organization of the Petroleum Exporting Countries and its allies) meeting

Context: Oil prices settled slightly higher on Tuesday, after recording sharp losses in the earlier session.

Details: The ongoing tensions between Russia and Ukraine have continued to raise concerns over oil supply around the world, sending oil prices to near record highs. However, with several major central banks raising interest rates to combat surging inflation, investors grew concerned about a slowdown in the global economic growth resulting in a decline in energy demand.

Oil prices declined sharply on Monday, ahead of the next meeting of OPEC+ producers scheduled for today.

Markets believe that the sharp decline in oil prices could make OPEC+ producers more cautious about increasing oil output. The return of oil production in Libya to the pre-blockade levels could also result in the OPEC+ keeping its production levels unchanged.

Natural gas prices moved lower amid projections of milder temperatures in parts of the US during the second half of this month.

WTI crude for September delivery gained 53 cents, or 0.6%, to close at $94.42 per barrel on the NYMEX on Tuesday. October Brent crude added 51 cents, or 0.5%, to end at $100.54 per barrel on ICE Futures Europe.

In another energy trading, September gasoline gained 2% to $3.057 a gallon, while September heating oil fell 1.7% to $3.38 a gallon. September natural gas tumbled 7% to $7.706 per million British thermal units.

What to watch: Markets will monitor the minutes of the meeting of OPEC+ producers, scheduled for today.

Traders also await data on crude oil inventories as well as gasoline and distillate stockpiles from the EIA (Energy Information Administration) today. US crude oil inventories had declined by 4.523 million barrels in the week ended July 22 and are expected to decline by another 0.629 million barrels in the latest week. US gasoline stockpiles are projected to contract by 1.614 million barrels, while distillate stockpiles are expected to increase by 1.038 million barrels in the latest week.

Other Markets: European trading indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.06%, 0.23%, 0.42% and 0.32%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s balance of trade, services PMI and composite PMI, Russia’s services PMI and composite PMI, France’s government budget value, retail sales, services PMI and composite PMI, Turkey’s consumer price index and producer inflation, South Africa’s S&P Global PMI, Spain’s services PMI and composite PMI, Italy’s retail sales, services PMI and composite PMI, UK’s services PMI and composite PMI, Eurozone’s services PMI, composite PMI, retail sales and producer prices, US MBA mortgage applications, services PMI, composite PMI, ISM services PMI, factory orders, total vehicle sales and Logistics Manager’s index, Brazil’s services PMI and composite PMI, as well as OPEC and non-OPEC ministerial meeting.