Oil price slump: profits decline, jobs at risk
The falling oil price is apparently not showing any respite as it continues to send shockwaves to global stock markets and to put the jobs of several thousand at risk in both in upstream (oil exploration and production) and downstream (refining and sale of fuel) businesses.
The global benchmark Brent crude was trading at $34 a barrel today after plunging more than 65 per cent since April 2014. The prices averaged $43 a barrel in the fourth quarter of 2015, down from $76 last year.
Asian shares edged down on Tuesday (February 2) as crude oil prices fell due to oversupply fears and after the gloomy Chinese manufacturing data for January pointed to fresh signs of economic weakness in the second-largest economy in the world.
Taking a cue from their Asian counterparts, major stock markets in the Middle East made losses during the day.
The Dubai benchmark index dropped 0.3 per cent while Abu Dhabi’s general index gave 17.73 points to close at 4,088.64.
Saudi Arabia’s Tadawul All Share Index was down 0.6 per cent, shedding 33.07 points to close at 5,952.65 points.
Earlier in the day, the oil giant BP reported a 51 per cent fall in profits in 2015, its worst year-on-year loss in more than 20 years.
The company, which lost $6.5 billion in its shocking results for last year, has warned of further cuts in its costs, including lay-offs.
Last week, the US oil producer Chevron posted its first quarterly loss in more than 13 years.
Analysts project that Royal Dutch Shell will record a nearly 50 per cent decline in profits compared with those in 2014. The world’s third-largest oil producer by market value is expected to announce its yearly results on February 4.
Meanwhile, Standard & Poor’s cut debt rating for Shell to the lowest since the rating agency began coverage in 1990.
More job cuts
BP today announced more job losses as part of a $2.5 billion restructuring programme announced last year.
The company said it would cut another 3,000 jobs in its downstream business. This is in addition to 4,000 cuts announced earlier this month.
Royal Dutch Shell announced earlier that it would be culling 6,500 jobs this year, as a part of its $4 billion reduction plan in operating costs. Chevron said it would reduce staff by 7,000.
In the UAE, meanwhile, Abu Dhabi-listed Dana Gas has announced its plans to slash its head office workforce by 40 per cent.
Overall, the oil industry is expected to have cut more than 250,000 jobs in the past 18 months alone, globally, as per Bloomberg estimates, as companies defer expansion plans to cope with the freefall in prices.
Most European oil and gas majors are able to balance their books only with oil at $60 per barrel.
S&P has also assigned a negative outlook to BP Plc, Eni SpA, Repsol SA, Statoil ASA and Total SA.