Summer Wont Cure Big Oil Blues – US-FOREX.US
Norway’s StatoilHydro was the latest oil major to report a slump in second-quarter earnings on Tuesday, with operating profits down 61% and net income at a clean zero. The 40%-50% slump in oil prices over the year has also depressed profitability at heavyweights like BP, Royal Dutch Shell and Total, and forced a cost-cutting drive across the industry. But with oil steadily rising past 70-71 per barrel, will summer bring some respite?The truth is, probably not. Although there is the possibility that stronger oil prices will offset some of the pain seen since summer 2008-when oil hit a high of 147.50 before sinking to below 70 by the end of September-actual demand for oil is not expected to post an annual rise until 2010. Then there’s the problem of natural gas prices, which lag oil by about six months, and are on the way down. On the other side of the balance, in “downstream” operations such as refining, the outlook is not much healthier. “Weak refining is also a drag on earnings,” said Gudmund Halle Isfeldt, an analyst with DnB Nor. He said that gasoline margins in the United States were currently at 15 per barrel, double where they were at the end of June, but that this was mainly driven by financial players and that they would fall again by October.Oil and gas stocks were down 0.8% across Europe on Tuesday morning, with StatoilHydro
down 0.6%, to 133.20 Norwegian kroner , in Oslo, while Royal Dutch Shell
and BP
slipped 0.4%-0.5% in London.StatoilHydro said its profits had taken a hit from lower oil and gas prices, currency volatility and “an unusually high” tax bill from foreign-exchange gains. The company’s net profits were wiped out to zero over the year, but stripping out the tax effects showed only a 48% drop in “adjusted” earnings, to 29.2 billion kroner . Production came in broadly as expected, at 1.7 million barrels per day.The firm kept its capital expenditure projection at 13.5 billion, with half of this figure earmarked for new projects. One-third of the total will go towards investment in existing assets. The aim is to reach annual production of 2 million barrels per day this year.