Home/Commodities/Newsfeed

Barclays Analysis Says For Every $10 Oil Price Drop Energy Companies Could Lose $2.8 Billion

Share Print 0

Dangerous and difficult oil fields that looked like goldmines when crude fetched more than $100 a barrel have turned into money pits as oil crashes to multiyear lows.

Collapsing oil prices not only shrink profits for producers and imperil dividend payouts prized by investors, they can cripple a company’s future growth by starving it of cash needed to find, drill, assess and equip discoveries. A spending halt in deep-water fields and Canada’s oil sands could disrupt the chain of new projects needed to keep the world supplied as older wells dry up.

For the biggest explorers, the impacts of slumping prices are dramatic. Every $10 price drop erases $2.8 billion in annual cash flow for Exxon Mobil Corp., according to analysts at Barclays Plc. (BARC) For Chevron Corp. (CVX), which is more crude-dependent than its bigger rival, a $10 change translates to $3.85 billion in cash flow.

“Because of their long lead times, once canceled or postponed, oil sands and deep-water projects cannot be brought online at short notice in response to rising prices,” Chief Executive Officer Andrew Hall said in a Jan. 2 communique to investors in his Astenbeck Capital Management commodity funds. “This sets up the potential — if not the inevitability — for supply shortfalls in the future.”

via Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza

@alfonso_forex

Back to Top