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Going Down?

LONDON -- BP plc yesterday said it struggled to lift output in the first quarter of 2002 while the margins it makes refining and selling oil products tumbled in what the company described as the worst trading environment in a decade.

BP said oil and gas production is on track to deliver 5.5-percent growth this year, but first-quarter output was slightly below the record level of 3.5 million barrels of oil equivalent per day (boepd) seen in the fourth quarter of last year, according to Reuters.

The weak output and slump in margins weighed on the shares of the world's third-largest oil company, which lost nearly 3 percent by early afternoon.

The U.S. and European markets for refining crude oil into products such as gasoline and diesel and then selling them to customers were the worst since 1992, BP said.

Marketing margins were squeezed in the first quarter by low demand, high stocks and fierce price competition, falling by 45 percent compared with the final three months of 2001. The U.S. market - which accounts for 45 percent of group retail sales - was particularly hard hit, with margins there down a staggering 80 percent from the fourth quarter of 2001, the report said.

"The recent rise in crude oil prices is also having a material impact on margins in some areas of our commercial businesses, where there is a short-term time lag in passing the increased product cost on to our customers," BP said in a statement.

Refining margins fell by 30 percent from the fourth quarter - hit especially in Europe and the U.S. West Coast and Midwest - owing to an overhang of stocks and low demand because of the warm winter and lower use of jet fuel as airlines cut flights in the wake of the Sept. 11 attacks.

But BP said refining margins had recovered a bit in March. The company last year set a target of achieving earnings growth of 10 percent a year.
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