According to the newly released 2020 Fortune Global 500 list, shell, BP and ExxonMobil have dropped by 2 places, 1 place and 2 places respectively compared with the previous year. Among them, shells position has been surpassed by two Chinese central energy enterprises, CNPC and State Grid.
Big oil companies generally suffer huge losses
The reason why oil companies generally suffer huge losses is very clear - oil prices. In March, OPEC novel coronavirus pneumonia talks began, and Saudi Arabia launched the oil price war, which overlaid the negative impact of the new crown pneumonia epidemic in the world. Oil prices fell rapidly, and Brents oil price fell below $20.
After April, the global blockade intensified due to the large-scale spread of the epidemic. However, with a new round of production reduction agreement reached by OPEC +, the oil price began to recover gradually and recovered to about $40 in June. However, the average oil price from April to June of this year is still far below the cost line of major companies, so it is reasonable for oil companies to suffer large losses.
BP is the first company to initiate large-scale asset write downs among oil companies.
On the afternoon of June 15, BP announced that it would significantly write down the value of assets in the second quarter of this year, ranging from $13 billion to $17.5 billion after tax. Just half a month later, shell announced its own write downs of $15 billion to $22 billion.
In addition to asset write downs, major oil companies have also lowered their expectations for future oil prices. BP forecasts that the average price of Brent crude oil from 2021 to 2050 is expected to be $55 / barrel, down 30% from the revised $70 / barrel.
Big oil companies are reassessing their long-term oil price assumptions and investment thresholds. Angus Rodger, head of upstream research at wood Mackenzie, told reporters, this process will continue and we expect further large-scale write downs across the industry.
Surprisingly, the oil and gas trading business of large IOC experienced an exceptionally strong growth just as the oil companies suffered huge losses in the second quarter.
BPs situation is very similar. In the second quarter and the first half of this year, the companys cost replacement profit in its oil products business segment was $1295 million and $1.984 billion, up from $961 million and $2.253 billion in the same period last year. The company explained that this was driven by exceptionally strong contributions from supply and trading..
This shows a surprising fact: even in the three months of such low oil prices, physical trade through various means is still very profitable. Three months is too short and special after all. An oil industry insider told reporters, there is no way to conclude whether this situation will be maintained throughout the year.
He explained to reporters that companies such as shell and BP can buy and store oil, lock in profits and earn price differentials by selling a large amount of forward crude oil in the derivatives market when the oil price drops sharply.
After this years sharp drop in oil prices, especially after reaching the low level of around $20 / barrel, the oil futures market has maintained the contango structure for a long time, that is, the forward futures prices are higher than those in the near future. The source told reporters.
However, not all oil companies can carry out arbitrage through trade. Large international oil companies have a high credit level and can make relatively low-cost loans. At the same time, they have strong supply chain management ability and a large number of cheap reserve capacity. Compared with independent trading companies or simple oil and gas production companies, they have unique advantages.
(author: Qi Yu, editor: Zhang Weixian)
This article is from Wang Xiaowu, editor in charge of economic report in the 21st century_ NF