London-based BP reported an underlying replacement cost profit of $231 million for its Castrol lubricants business before interest and taxes for the third quarter, a 29% decline from $326 million in the same period in 2020. The company cited rising base oil prices as a key factor.
“Castrol results in the quarter were lower than last year, with industry base oil prices more than doubling and severe lockdown restrictions in place across key Asian markets,” BP said in a filing on the New York Stock Exchange.
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For the first three quarters of this year, Castrol results were up 49% at $830 million, compared to $556 million over the first nine months of last year. This was due to lubricant volumes and earnings being materially higher than in the same period in 2020, the company said, with China delivering record underlying earnings.
Replacement cost profit or loss reflects the replacement cost of inventories sold in the period and is arrived at by excluding inventory holding gains and losses from profit or loss.
The energy giant said it expects more softness in the near future for a group of business segments including Castrol lubricants. “In our customer businesses, we expect lower product demand due to seasonal impacts and continued base oil tightness and additive supply shortages in Castrol,” BP said in its guidance for the fourth quarter.