Shares in the world’s biggest energy groups have tumbled in a market rout as plunging oil prices put at risk billions of dollars of investment and jeopardised future supplies of crude.
The sharp slide in the price of Brent oil after Opec’s decision not to cut output triggered warnings that oil companies would cut as much as $100 billion of capital spending in response, imperilling the US shale bonanza and threatening much Arctic oil exploration. Meanwhile oil’s fall continued to play havoc with the currencies of oil exporting countries, especially Russia. At one point on Friday, the rouble slid to a record low.
Leonid Fedun, vice-president of Lukoil, Russia’s second largest crude producer, told the Financial Times that Opec was trying to turn the US shale oil “boom” into a “bust” for smaller producers.
He compared the surge in North American shale to the dotcom and subprime mortgage booms, and said Opec’s objective now was “to get small producers with large debts and low efficiency to pack up and leave the market”.
Output ceiling
Opec said on Thursday that it was leaving its output ceiling of 30 million barrels a day unchanged, prompting a swift 8 per cent drop in the oil price, which was already down by nearly 40 per cent since mid-June. Brent fell $2.80 on Friday to $69.78, a four-year low.
Saudi Arabia
The move showed that Saudi Arabia, Opec’s largest producer and effective leader, had decided to relinquish its traditional role of balancing the oil market by increasing or reducing output, letting prices do the job instead, analysts said.
“We cannot overstate what a dramatic and fundamental change this is for the oil market,” said Mike Wittner, senior oil analyst at Société Générale.
Friday’s brutal sell-off in the US and across Europe hit shares in the oil majors, the big oil services companies that supply them, as well as the smaller explorers most exposed to the plunge in crude.
But the slide could bring relief for motorists. In the UK, the Petrol Retailers Association said it could trim the average price of petrol – 122.6p per litre – by another two pence over the next couple of weeks.
