Oil and gas giant BP returned to profit in the third quarter, signalling a more positive outlook despite a slump in demand for oil.

BP said that its underlying replacement cost profit, its definition of net income, was $86m from July to September. Down when compared to $2.2bn a year earlier, but a significant improvement on its enormous second-quarter loss of $6.7bn.

The oil company’s underlying profit has exceeded the $120m loss predicted by equity analysts before the results announcement.

Improved performance is attributed to a number of factors

The company has credited its improved performance with the absence of big write-offs, alongside a recovery in oil and gas prices, for the improvement in its bottom line. Major projects coming online have also bolstered growth.

On 12 October, the company announced that production had begun from its Block 61 Phase 2 Ghazeer gas field 33 months after the development was approved. Ghazeer was initially expected to come into production in 2021. Production at Block 61 is expected to rise to 1.5 billion cubic feet of gas a day and more than 65,000 barrels a day of associated condensate.

Oil prices averaged $42 a barrel in the third quarter, up from an average of $30 over the previous quarter, which has supported BP’s financial performance. The gradual recovery in oil demand is set to continue. However, the shape and pace of recovery remains uncertain and is dependent on the spread of the virus.

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BP has undergone significant change to battle the pandemic

The pandemic has undoubtedly transformed BP, which has been pushed to make major changes to survive the tough climate.

On 29 June, BP announced that it has agreed to sell its global petrochemicals business to INEOS for a total consideration of $5bn, which is a major step in focusing its portfolio and reinventing itself as a lower carbon company.

The company has also forecast lower oil prices for decades to come as governments across the world accelerate plans to cut carbon emissions in the wake of the coronavirus crisis. As a result, it wants to halve the amount of carbon in its products by 2050.

Earlier in June, BP announced plans to cut 10,000 jobs, following a global slump in demand and a drop in prices for oil because of the coronavirus crisis. Lockdowns and travel restrictions meant that the cost of oil fell to less than $20 a barrel at the peak of the crisis, less than a third of the $66 it cost at the start of the year.