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“Brent crude is on the move again, wielding a scythe”
Brent crude is on the move again and this time the shadowy figure of the commodities space is wielding a scythe.
Fresh manufacturing data from China showed a new slowdown resulting in pricing levels below $50 per barrel for the first time in four months at the start of August. And in the same week the effects of the year-long oil price collapse have reached crunch point.
Already, analysts estimate that around $200 billion of oil and gas projects have been shelved as a result of the market crash. Good news for environmentalists, but agony for the companies themselves.
For UK utilities this is most clear in the latest H1 financial results from Centrica Energy, which saw operating profits plummet from £526 million to £116 million, with particular pain for its gas business, whose profits fell from £465 million to £48 million over the same period.
Centrica is poised for a staff cull of some 6,000, but it is not alone. Oil and gas giants Shell and BP have also seen profits crushed, with Shell expected to top Centrica’s jobs cuts by slashing 6,500 from its workforce.
So where does the pain end? Shell seems to think that will be by the end of the decade, but even then its estimates suggest a return to between $70 and $90 per barrel. And even that is couched with the word “potential”.
The smart energy companies have already made moves to adapt to a new world order. For everyone else it could be a long five years.
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