Energy groups left bruised as falling oil prices bite into profits
Tumbling oil prices have hit the earnings of two big London-listed energy companies, in one of the first tangible signs of how the oil supply glut is reverberating across the global economy.
FTSE 100 oil and gas producers BP and BG Group both reported a fall in third-quarter profits on Tuesday, in part due to the drop in the oil price over the period.
“This is prompting the whole sector to consider the implications of a sustained period of lower oil prices,” said Brian Gilvary, BP’s chief financial officer.
Royal Dutch Shell, Total, Chevron and ExxonMobil, which also report quarterly earnings in the coming days, will probably face similar questions about the impact of cheaper crude on their businesses.
The effect could be even greater in the final quarter, since the oil price has been falling more sharply since the end of September than it did in the three prior months.
Crude has dropped 25 per cent since mid-June, driven lower by surging supplies of shale oil from the US and a slowdown in global demand, particularly in China, the world’s second-largest petroleum consumer.
Instead of reducing output to boost prices, some members of Opec, the oil producers’ cartel, which gathers next month for a hotly-anticipated meeting, have been discounting exports in order to defend market share.
“We are going to wait until Opec has met and until we are significantly through the fourth quarter before taking definitive action,” Mr Gould said, referring to future spending plans.
BP reported that underlying replacement cost profit, analysts’ preferred measure of performance, fell 19 per cent to $3bn in the three months to September, compared with $3.7bn a year ago.
Source: FT- Energy groups left bruised as falling oil prices bite into profits
