BP reports $532-mn Q1 profit despite low oil prices

British oil company BP Plc posted a surprise profit in the January-March 2016 quarter, on the strength of its refining and trading margins, to emerge the first oil major to report earnings in the first quarter of the current year amidst decade-low oil prices.

London-based BP said its profit for the quarter, after adjusting for one-time items and inventory changes, totaled $532 million compared with $2.6 billion a year earlier. Market analysts had expected the company to register a loss of $244.9 million.

The report buoyed BP, which emerged as the second-biggest gainer in the FTSE 100 Index.

BP, however, lowered its 2016 spending target to $17 billion, from $17-19 billion, and said this could further fall to $15-$17 billion next year if oil prices remain weak.

Adjusted profit before interest and tax from its downstream operations for the quarter stood at $1.8 billion, 16 per cent lower than a year earlier but 49 per cent higher than the preceding quarter.

In the upstream business, which includes oil and gas production, BP posted a $747 million loss compared with a $604 million profit a year earlier.

''Lower costs, strong refining operations and an improved supply and trading contribution more than offset the impact of the weaker refining environment and the seasonal reduction in fuels sales,'' BP said in the statement.

The company had started cutting costs and selling assets following the 2010 oil spill in the Gulf of Mexico.  But a $20.8-billion settlement related to the spill approved this month has now ''removes uncertainties'' for BP.

BP is now pinning hopes on oil at $50 a barrel to increase capital spending and ensure investor returns by next year.

The average price of Brent crude, the global benchmark, slumped to the lowest in almost 12 years in the quarter. While Brent's decline below $28 a barrel in January cut earnings from production, it made crude cheaper for BP's refineries.

Oil has rallied since January, rising above $45 as US crude production slowed and major producers, including Saudi Arabia discussed a possible cap on output.

BP's shares were up 5 per cent this year after a 14 per cent decline in 2015. The stock rose as much as 3.7 per cent and traded 3.2 per cent higher at 372 pence at morning trade in London.