British oil and gas giant BP (NYSE:BP) is set to cut its global headcount by about 10,000 people. In an email to employees, CEO Bernard Looney announced the job cuts, which work out to about 15% of the company's workforce. This is a reversal from the company's moratorium on job eliminations as the COVID-19 crisis hit the industry hard. 

Today's announcement came out even as many oil stocks rallied, following news that the OPEC+ group of oil-producting nations had agreed to extend their record oil output cuts deal through the end of July. 

Unemployment benefits form.

Image source: Getty Images.

"Can't make worries disappear"

In the email, which was obtained by numerous media outlets, Looney pointed out that BP, like most major oil companies, continues to burn more cash than it is earning with every passing day. After putting it off for three months, BP is joining the ranks of other oil and gas majors to cut staff. Even with prices up sharply over the past month, global oil demand is still down sharply, while oil output -- even with the OPEC+ deal taking almost 10 million barrels per day off the market -- continues to exceed consumption. 

As Looney put it to employees, he "can't make [their] worries disappear." BP reported as $4.4 billion loss last quarter, and a nearly 90% sequential decline in operating cash flows. Free cash flows fell from almost $4 billion in the prior quarter, to $2.84 billion in negative free cash flows. 

Riding out a protracted downturn

Even though many oil stocks have rallied over the past month on rising crude prices and big declines in oil production, oil producers continue to book massive losses. Crude prices are still below breakeven for most producers, while demand is still down as much as 20% in much of the world. Factor in record levels of oil in commercial storage, in offshore storage in shipping vessels, and record levels of refined products in storage, the industry could face a protracted downturn. 

To ride out that downturn, BP is taking steps to cut costs. Another 10,000 people will be hitting the global unemployed ranks as a result. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.