Tuesday, February 09, 2010

Oil Giants' Crude Quarter has a Common Theme

The last quarter was very ‘crude’ for the oil industry’s books. Fourth quarter results of three oil majors – namely Royal Dutch Shell, BP and Exxon Mobil make-up for some interesting reading with one common theme. Beginning with Exxon Mobil, the American oil behemoth reported on February 1st, 2010 that its fourth quarter profit dipped 23%. The decline meant it made a net profit of $6.05 billion over Q4 2009, compared to a $7.82 billion profit noted over the corresponding period last year. For the whole of 2009, Exxon's profit stood at $19.3 billion, less than half of what it made in 2008, and the lowest in seven years.

Then on February 2nd, BP said its Q4 2009 profits were up 33% to $3.45 billion. However, its annual profit was down 45% with the replacement cost profit at $13.96 billion compared to $25.59 billion in 2008. Two days later, on February 4th, Royal Dutch Shell’s profits for Q4 2009 came in at $1.2 billion, down by a whopping 75% from the $4.8 billion the Anglo-Dutch oil giant made over the corresponding quarter last year.

For the whole of 2009, Shell made a dwarfed $9.8 billion in profits, compared to $31.4 billion it made in profits over 2008. All three oil majors found common ground in suggesting that a global slump in demand courtesy of the economic climate and a dip in oil prices were to be blamed for their relatively poor set(s) of quarterly results. All three, in addition to many of their industry peers, added that the outlook for 2010 was uncertain.

In the midst of all this, OPEC secretary general Abdalla Salem El-Badri told the BBC that its members’ compliance with set production targets fell to 55-56% in January compared to 80% noted over the corresponding month last year. He described the development as "worrying".

El-Badri further said, "The risk is you see a lot of oil in the market and no one is buying it. Then the price will come down." At its last meeting in Angola on December 22nd (2009), OPEC held output at 24.84 million barrels per day.

OPEC and oil companies seem to bring up the word “uncertain” with some degree of conviction these days, more so because forecasting consumption patterns is proving to be mighty hard. Chinese and Indian consumption patterns and sluggish recovery in the West complicates drawing an overall global picture even further.

As for the prevailing price of black gold, NYMEX crude contract for March settlement was up 79 cents, or 1.10% trading at $72.67 a barrel and in the circa of $71.32 to $73.04 per barrel at 15:04 GMT. The corresponding Brent crude contract was up 87 cents, or 1.27 %, to $69.98 a barrel, trading in the circa of $69.61 to $71.30 in London. Overall, it’s still a far cry from a $147 per barrel price of July 2008. Many wonder for how long, but for very different reasons.

© Gaurav Sharma 2010. Photo Courtesy © Cairn Energy Plc

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