UPDATE 1-BP eyes more spending cuts after 80 pct profit drop

* BP Q1 profits beat analysts' expectations

* British firms says can cut capex to $15 bln

* BP CEO sees market rebalancing at end of 2016 (Adds details, recasts)

By Ron Bousso and Karolin Schaps

LONDON, April 26 (Reuters) - BP said on Tuesday itcould cut capital spending further after reporting an 80 percentdrop in profits in the first quarter of the year, when oilprices touched a near 13-year low.

Chief Executive Officer Bob Dudley nevertheless said heexpected crude prices to recover towards the end of the year asproducers halt work on fields and fuel demand remains robust.

"Market fundamentals continue to suggest that thecombination of robust demand and weak supply growth will moveglobal oil markets closer into balance by the end of the year,"Dudley said in the results statement.

Faced with the worst downturn in the oil sector in at leastthree decades, BP reduced its capital spending three times in2015 to $19 billion, slashed nearly 10 percent of its around80,000 workforce and sharply lowered costs.

BP slipped to its biggest annual loss last year as a resultof lower oil prices, costs related to the settlement of a deadly2010 Gulf of Mexico oil spill and huge writedowns.

The company said it expected its 2016 capital expenditure toreach $17 billion, at the lower end of its previous guidance,and that "in the event of continued low oil prices" it sawfurther flexibility to lower spending to $15-$17 billion.

It also expected 2017 cash costs to be $7 billion lower thanfor 2014.

BP's first quarter underlying replacement cost profit, itsdefinition of net income, was $532 million, down from more than$2.6 billion a year earlier but beating forecasts for a loss of$140 million, according to consensus figures provided by BP.

Its refining and trading segment, known as downstream, onceagain came to the rescue with a quarterly profit of $1.8billion, offsetting a $747 million loss in oil and gasproduction.

BP maintained its dividend at 10 cents per ordinaryshare. (Reporting by Karolin Schaps and Ron Bousso; Editing by MarkPotter)