Oil majors Royal Dutch Shell and BP are expected to report sharp falls in third-quarter profits in the coming week, despite record oil prices, due to lower production, tighter refining margins and higher costs.
A Reuters poll of 10 analysts gave an average forecast of $4.06 billion (1.98 billion pounds) for third-quarter replacement cost net profits at BP -- a 10 percent drop compared to the same period last year.
Shell was forecast to report a 21 percent drop in current cost of supply net profits to $5.52 billion in the period.
The two measures of profit strip out the impact of changes in the value of inventories. Analysts also exclude one-off items such as asset sales from their forecasts as they believe this produces the best estimate of underlying business health.
The profit falls come in spite of Brent oil prices averaging $75 per barrel during the quarter -- a record quarterly high.
However, the oil majors have not received the full benefit of higher oil prices because governments around the world are raising tax levels and tightening contract terms to keep more of the gains for themselves.
Lower production is also expected to weigh on earnings.