BP reports $5.8B loss after setting cash aside for Gulf oil spill

British oil company BP reported a second-quarter net loss of $5.82 billion US on Tuesday after setting aside another $10.8 billion US to cover the cost of the Gulf oil spill.

BP has agreed to pay a total of $54.6 billion for costs associated with the Deepwater Horizon, which had a fire and explosion in 2010 that killed 11 workers and spilled millions of gallons of crude into the Gulf of Mexico.

Last month it announced a deal to provide $18.7 billion in compensation to five U.S. states for environmental cleanup.

This year's loss compares to net income of $3.37 billion a year earlier.

However, low oil prices are affecting the outlook for BP, like all oil companies. The price of Brent crude, the most common international contract, averaged $62 US a barrel in the second quarter, down from $110 a barrel last year.

Low oil prices

And there is continuing pressure on Brent crude, which stands at $52 today.

"In the past few weeks, oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran," said BP chief executive Bob Dudley. "I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future."

Underlying replacement cost profit – a key measure for oil companies which strips out one-time items and changes in the value of inventories --- fell 64 per cent to $1.31 billion, the company reported.

Dudley said the company is responding by increasing efficiency and continuing "with capital discipline and divestments."

The company is relying on its downstream activities – refining and processing oil – to make profit, while upstream activities such as exploration and development remain a burden.

It continues to cut costs for development and expects to spend less than $20 billion this year.

Energy analyst Wood Mackenzie has estimated the oil industry has postponed $200 million of investment worldwide this year, much of it in offshore and the Canadian oilsands.