A summit which aims to bring together governments, trade unions and industry bodies to save jobs in Scotland’s oil capital has been announced. Jenny Laing, leader of Aberdeen City Council, has called on the Scottish and UK Governments to attend the summit on the North Sea oil industry which is struggling under plummeting oil prices. Labour has pledged to send its leader Jim Murphy and has urged First Minister Nicola Sturgeon and Prime Minister David Cameron to attend.
The FTSE 100 Index completed its best week in three years today - just a week after its worst in three years. London’s top-flight was up 3.9% after recent market jitters were assuaged by indications from the US Federal Reserve that while the world’s largest economy is improving there will be no hurry to raise interest rates. The FTSE 100 has enjoyed its biggest weekly climb since December 2011, adding £62 billion to the value of its constituent companies.
Investors betting on a rebound in oil prices are nothing if not tenacious. They have poured the most money in more than four years into exchange-traded products that track oil as prices fell 18% this month. It’s the third consecutive month that the four biggest US funds have received money, during which time futures have plunged 41%.
Oil and gas expert Alex Kemp said he did not agree with comments made which claimed the North Sea was “close to collapse”. Robin Allan, chairman of the independent explorers association Brindex, said it is “almost impossible to make money” with the oil price below $60 a barrel. However Mr Kemp said the current investment in new fields had been predicted to lessen when oil prices were at $90 a barrel.
North Sea “close to collapse” says the man from Brindex. I am of course referring to remarks made to the BBC by its chairman Robin Allan, who then goes on to say that the UK’s offshore industry has been in such territory before. The 1986 oil price crash was a shocking event and did terrible damage at the time. However, it also marked the start of a turning point as the North Sea gradually started to mature. Various initiatives in the 1990s designed to tackle key issues like rocketing costs helped and they were timely given the next slump that started with a gradual oil price slide in 1997, bottoming out in late 1998 at less than $10 a barrel for a few days.
The UK’s oil industry is “close to collapse” but the falling oil price could have a net benefit to the UK economy, according to experts. Robin Allan, chairman of the independent explorers’ association Brindex, said it is “almost impossible to make money” with the oil price below 60 US dollars (£38) a barrel and there will be no new investments. But accountants PricewaterhouseCoopers (PwC) said the falling oil price “should be a net benefit to our economy as a whole, even if there is some losers in the UK oil and gas sector and in particular places like Aberdeen”.
The FTSE 100 Index held on to strong gains in the previous session today as a bullish start for Wall Street and an oil price bounce helped blue-chip shares recover from earlier turbulence. A volatile session on Tuesday hit by jitters over the price of oil and the slide in value of the Russian rouble had seen the index close 2.5% ahead. The latest session saw it earlier fall by nearly 100 points but recover to close 4.6 points up at 6336.5. Oil climbed back above the 60 US dollars mark for a barrel of Brent crude.
Volatility for world markets continued today as the FTSE 100 Index put back a large chunk of the 2.5% rise seen in its previous session. Oil prices steadied at 60 US dollars for a barrel of Brent crude but this was not enough to prevent another weak session in Europe as confidence was hit by the continued financial crisis in Russia. The FTSE 100 Index stood 45 points lower at 6287.1, having rebounded by 2.5% or 149 points at the end of choppy trading yesterday.
The “big four” supermarkets are all cutting their fuel prices. With world oil prices plunging, Asda, Sainsbury’s, Morrisons and Tesco are all reducing their petrol by 2p a litre and their diesel by 1p a litre from tomorrow. The Asda cut means its customers will pay no more than 110.7p a litre for petrol, with the company’s diesel costing 117.7p a litre.
Nigeria’s two oil unions are set to meet with government officials for talks today as an indefinite strike aimed at curbing local fuel supply and exports entered a third day in Africa’s biggest crude producer. The impact of the strike has been restricted to domestic fuel supply with oil lifting and export terminal operations unaffected at the moment, Francis Johnson, president of the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said from Lagos, the commercial capital. Union leaders will hold talks with the authorities today in Abuja, the capital, he said.
West Texas Intermediate oil rebounded after sliding below $55 for the first time in more than five years in New York trading. WTI for January delivery gained 83 cents, or 1.5%, to $56.74 a barrel on the New York Mercantile Exchange. Futures earlier touched $53.60, the lowest since May 2009.
A volatile session saw the FTSE 100 Index fluctuate between positive and negative territory today as the fall-out from falling oil prices continued. Brent crude dipped below 60 US dollars a barrel for the first time since 2009, meaning the energy industry benchmark is now down by about 50% since the summer amid concerns about weakening demand and oversupply. The slump has been worst felt in Russia, where a sudden hike in interest rates from 10.5% to 17% overnight failed to prevent a fresh decline in the value of the rouble, which stood at a new record low.
Armada Oil has terminated the terms of its existing credit facility amid the recent decline in oil price. The firm said it was working with its current lender to secure an extension of the terms of its existing credit facility and expects a resolution before the ed of the year. The loss of its financial facility has also halted work on the Bear Creek #1 project.
Crude oil prices are poised to fall below half where they were six months ago, before producers begin dealing with a global glut. Brent, the global benchmark, will slide to as low as $50 a barrel in 2015, according to the median in a Bloomberg survey of 17 analysts, down from the $115.71 a barrel high for the year on June 19. The grade has already collapsed 47% since then and needs to fall further before producers clear the current glut, said five out of six respondents who gave a reason.
Argentina is depending on two things to reverse a three-year energy shortfall that’s costing $6 billion a year: a shale formation bigger than Massachusetts and Miguel Galuccio, who has worked on drilling operations from North Dakota to Poland and India. President Cristina Fernandez de Kirchner appointed Galuccio chief executive officer of YPF SA (YPF) in 2012 after she seized control from Spain’s Repsol SA. Since then, Galuccio has tripled investment in the state-run oil company in an effort to reverse a decline in output that’s led to crippling energy shortages and drove Argentina’s energy imports to record highs. As oil prices plunge below $60 a barrel and global producers revise their spending, Galuccio is sticking with a strategy for the Vaca Muerta shale formation that relies on foreign partners with a long-term view.
The problem with the UK’s North Sea oil sector is that its production costs are higher than those in most other world regions and have been spiralling upwards at an alarming rate for the past 10 years.
Crude prices came under renewed pressure yesterday, and Brent hit five-year lows of nearly $60 a barrel after producer group Opec said it would stick to its decision not to cut output despite fears of a world awash in oil. Brent and US oil initially extended last week's rout, which wiped more than 10% off global crude prices. They were up in New York's Monday morning trade after news that Libya's two biggest oil ports had shut due to fighting between armed factions allied to the country's two rival governments. Loading delays for January cargoes of North Sea Forties crude due to lower-than-expected output was also positive for oil. The North Sea Forties set prices for Brent.
Iraq will sell its Basrah Light crude next month to customers in Asia at the steepest discount in at least 11 years, following Saudi Arabia’s lead as Middle East producers seek to defend market share. Basrah Light, a high-sulfur oil used by refiners including China Petroleum & Chemical Corp., was set at $4 a barrel below the average of Middle East benchmark Oman and Dubai grades, according to a statement from Iraq’s Oil Marketing Co. That’s the lowest since at least August 2003. The official selling price to US buyers was cut by 30 cents compared with December, while shipments to Europe were marked up by 10 cents.
Brent and West Texas Intermediate fell to a five-year low as Iraq followed Saudi Arabia in cutting prices for crude sales to Asia, adding to signs that OPEC’s biggest members are defending market share. Futures dropped as much as 1.3%t in London to the weakest intraday price since September 2009. Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, reduced its Basrah Light crude to the lowest in at least 11 years, a price list for January showed.
Stock markets, oil companies, service companies and investors are reeling from Saudi’s shock decision not to support a cut in OPEC production in order to balancesupply and support prices, and the consequent slump in oil prices. This stance is a radical departure from Saudi’s previous behaviour when supply and demand fell modestly out of balance. In the past, a few words of support have been enough to have the oil traders scurrying back to their desks to close their short positions. Why the change of policy on this occasion?
Algeria will press ahead with its $90 billion investment plan in the North African country’s oil and gas industry even with crude prices trading near five-year lows, said the head of state-run energy producer Sonatrach. Sonatrach will invest $22 billion in natural-gas field development as part of the $90 billion program for 2015-19, said Sahnoun, the company’s interim chief executive officer, said at the North Africa Oil & Gas Summit conference in Algiers yesterday. Oil prices have declined about 40% from a June peak amid overproduction and slower demand growth. Brent crude ended last week at $69.07 a barrel.
Oil prices have dipped below 80 US dollars a barrel for the first time in four years, boosting hopes for cheaper petrol on UK forecourts. The price of Brent crude for December delivery fell as low as 79 US dollars a barrel after industry cartel Opec yesterday predicted that demand for its oil will be slightly lower next year at 29.2 million barrels a day. The world’s uncertain growth outlook, with the eurozone stagnant and Chinese expansion showing signs of easing, has fuelled fears that there will be a glut of oil swilling around the global economy.
OPEC won’t cut its collective crude output when it meets later this month and global oil prices will stabilize once the surplus is absorbed by the market, Kuwait Oil Minister Ali Al-Omair said. OPEC, which supplies about 40 percent of the world’s oil, meets November 27 to debate supply. The 12-member Organization of Petroleum Exporting Countries, which has a production target of 30 million barrels a day, pumped 30.974 million barrels a day in October, according to data compiled by Bloomberg. “I don’t think there will be any cut in the production,” Al-Omair said at a conference in Abu Dhabi in the United Arab Emirates. “We feel prices will settle down once surplus oil is absorbed.”
The price of Brent crude has steadied at $86 a barrel after the announcement of a cut in Saudi-Kuwait oil output. Production at the Khafji oilfield has been stopped temporarily for environmental reasons.