(Bloomberg) -- Crude’s plunge keeps piling on the bad news for oil producers, who are having the worst start to a year on record.
More than $100 billion has been wiped off the 61-company Bloomberg World Oil & Gas Index this year as it plunged to the lowest since August 2004. It has dropped 5.6 percent, making it the worst opening to the year since the index started in 2003. Thailand’s PTT Pcl, Apache Corp. and China Petroleum & Chemical Corp. led the decline.
Crude is hurtling down toward $30 a barrel as concerns increase over China’s economy, a supply glut persists and the world’s biggest oil-producing nations continue to pump at near- record levels. European and Asian shares dropped to three-month lows with U.S. stock futures as billionaire George Soros warned of a crisis. Goldman Sachs Group Inc. and Citigroup Inc. say oil may have further to fall.
“It’s going from bad to worse very quickly,” Ahmed Ben Salem, oil and gas analyst at Oddo & Cie in Paris, said by phone. “Doubts over China’s demand have been added to already existing concerns over the surplus supply.” Royal Dutch Shell Plc, Europe’s biggest oil company, dropped as much as 5.7 percent and BG Group Plc, the company it’s seeking to buy, fell as much as 6.4 percent in London. Sinopec, Asia’s biggest refiner, plunged 7.6 percent in Hong Kong and PetroChina Co., the world’s second-biggest oil company by market value, lost 6.8 percent.
Companies around the world have slashed billions of dollars of spending, reduced thousands of jobs, halted projects and suspended dividends in an effort to ride out the slump. Revenue and profit have dropped and some companies have defaulted on debt. Shell’s Chief Executive Officer Ben Van Beurden and BP Plc boss Bob Dudley have said they expect the downturn to be prolonged.
“Companies have done a good job but oil prices have dropped so quickly they haven’t been able to adjust quickly enough,” Salem said. “2016 is going to be very tough for them as the oil market is unlikely to balance out this year.”
China’s central bank reduced the onshore yuan’s fixing to the lowest since March 2011, triggering a selloff that led to the closure of Chinese stock exchanges. Chinese policy makers’ growing tolerance for a weaker yuan is being seen as a sign they are struggling to revive an economy that’s the world’s biggest user of energy, metals and grains. Those concerns helped wipe $2.5 trillion off the value of global equities in the first six days of this year as North Korea conducted a nuclear weapons test and relations soured between Saudi Arabia and Iran.
Brent crude, the international benchmark, has dropped below $33 a barrel to the lowest in 11 years as supply continues to outstrip demand. It’s lost more than 10 percent this year, adding to last year’s 35 percent decline.
“It could go even lower, and it just underlines the uncertainty,” Statoil ASA Chief Executive Officer Eldar Saetre said in an interview in Oslo. “We still have a situation with an imbalance in the market.”
--With assistance from Mikael Holter.
To contact the reporter on this story: Rakteem Katakey in London at firstname.lastname@example.org To contact the editors responsible for this story: James Herron at email@example.com Dylan Griffiths, Amanda Jordan.
Copyright 2017 Bloomberg News.
WHAT DO YOU THINK?
Click on the button below to add a comment.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Most Popular Articles
From the Career Center
Jobs that may interest you