Oil and gas, hard time continuing

It was on the main page of a newspaper I saw yesterday. Petronas will cut RM50 billion spending over the next 4 years. Of course the most should come sooner because the spending may be increased again when the oil and gas prices recover, if they recover. Today, in Facebook, someone shared news about Schlumberger cutting 10,000 staffs. The firm suffered its first quarterly loss in 12 years and the net loss amount is US$1 Billion. This was not all, Bank Simpanan National (BSN) explained that as part of the bank’s on-going risk management measure, it is implementing a tighter lending rules for customers working in the oil and gas sector who are applying for new loans and credit products.

Before we believe everything is bad, well there are also the following few predictions. Recently, Goldman Sachs predicted that oil prices would end at US$40 per barrel within H1 2016. Today, the oil price is at US$30.95. Based on the current price, this represents potential upside of nearly 30 percent! Warren Buffet did not say what he think the oil prices should be but he bought lots of shares in an oil related counter. Read here: Falling oil price and actions of Warren Buffet. Lastly, reported in BBC News just days ago, according to the boss of British Petroleum (BP), “We could see a price $30 to $40 by the middle of the year and I think towards the end of the year it could be into the $50s.”

 

In one article we have learnt that there are so many bad news and some potentially bullish predictions for oil price recovery. I am of the opinion that there is still oversupply and with such a bad ‘mood’ prevailing in the market, all of us should be enjoying cheaper petrol prices at the stations for many more months. Oh yeah, this is what chairman of Saudi Aramco, Khalid al-Falih said during a forum panel session in CNNMoney, “If the prices continue to be low, we will able to withstand it for a long long time…obviously we hope it will not happen.” An extremely strong statement indeed which meant that they will not take any action at all to help oil price recovery. Happy pumping.

written on 23 Jan 2016

next suggested article: Barclays: Oil prices rising to US$85 a barrel by 2020

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