After StatoilHydro and OMV, Sasol of South Africa has become the latest middle-ranking oil company to cut its dividend and its capital spending plans.
The big question for investors: who is next? BP?
Al-Hayat has one of the most experienced and well-connected Opec correspondents of all the news outlets that follow the cartel closely. And the paper has good access to Saudi officials. However, even Al-Hayat is not immune to Opec’s ‘sudden’ changes of plan, so reader beware:
Reuters in Riyadh has the full story, but here are the main quotes from unnamed sources:
“There is no need to speak of a new production cut as it
would be enough to enhance compliance with the previous
decisions,” al-Hayat reported, citing unnamed sources.
“Saudi has informed the presidency of the organization,
which is Angola, that there must be… serious compliance with
the latest reduction decision taken in December which has
prevented oil prices from falling further,” al-Hayat reported,
citing a senior source.
Outstanding results from Petrofac, which builds and operates oil and gas plant, and appears to be bucking the gloomy trend in the oil services business.
Everyone and their dog has been warning that declining investment in oil infrastructure now, as low oil prices remove incentives for big spending, could store up problem in the future. By the time demand picks up, the industry may have reduced its investment in production such that we’ll see a supply crunch where prices rise sharply.
This risk has been written by everyone from analysts and policy wonks to USA Today. It’s a function of the oil industry: huge amounts of capital are spent developing new oil sources, and they do not go online quickly. So while the big international oil companies such as Exxon and BP are holding their investment levels reasonably steady this year, the outlook is less certain for 2010.
More good news from Tullow Oil, one of the great success stories of the independent oil sector this decade. It has had yet more good exploration results from its offshore fields in Ghana and, more importantly, has sealed the deal for its $2bn refinancing.
UPDATE: Tullow shares are up 9.3 per cent at 803p in afternoon trading in London.
Harry Reid, the Democratic senator and majority leader, has introduced legislation for a grid that is both smart and taps into renewable energy (as we have noted before, the two objectives are not the same).
“Simply put, the bill makes it easier to deliver clean energy from the often-rural areas where it is harnessed to major population centers throughout the country,” says a statement on Senator Reid’s website.
But will legislation alone be enough?
(Updated) The days preceding an Opec meeting are usually tense ones for oil market participants, and oil prices have been edging higher in recent days as this Sunday’s meeting nears and further cuts are anticipated.
After Opec’s cuts of 2m barrels per day in September and a further 2.2m in December; and signs that these cuts are actually taking effect (another tanker tracker last week added to the evidence), the WSJ argues that Opec may decide it has no need for further deep cuts.
Comments by Opec secretary general Abdullah el-Badri this morning told a different story, though: Reuters reported he said Opec would cut its demand forecasts by 1m barrels a day in its March monthly report.
Update: Carola Hoyos has poined out that Dow Jones is reporting Opec would revise its forecasts to a total decline of 1m barrels a day in 2009, and as it was already forecasting a 580,000 bpd decline this year we will need to confirm what the actual change is. Stay tuned…
Either way, a big fall in demand is likely to make Opec ministers more likely to favour cutting production in order to stop prices falling further. (Though we are not taking any bets, adds Carola sheepishly)
Update 2: I’m told Dow Jones is correct, Carola
Energy news from elsewhere:
- US retail gasoline rises to $1.96, oil analyst Lundberg says (Bloomberg)
- China oil reserve now full and sea storage needed (Reuters)
- US clean-energy sector looks for private and public help (WSJ)
- China’s Sinopec gets $336m subsidy to cover refining loss (Reuters)
- Venezuela’s finance minister optimistic oil prices will rise (Bloomberg)
Energy news from the FT:
- Expansion of LNG threatens gas glut
Global LNG production capacity to grow by 30%
- Chevron to unveil technique to unlock new Middle East reserves
Method to be used in neutral zone between Saudi Arabia and Kuwait
- ONGC launches counterblast at Goldman
Indian oil company’s chairman says Goldman report ‘devoid of facts’
- Conoco caught out by lower oil prices
US oil company now has tough job reassuring investors
- Doubts persist over Veolia’s financial health
French utility’s chairman upbeat despite €17bn debt
- NRG Energy desperate to stave off Exelon bid
US energy company insists suitor’s $6.2bn hostile bid undervalued
- Beijing Olympics powers Aggreko to record
Generator rental company expects to match results this year