Hegnar.no: Oil and Offshore crack in Oslo
The oil prices have experienced the longest decline in 34 years. Huge values have disappeared for shareholders in oil and offshore on The Oslo Stock Exchange. This constitutes a crack.
On Thursday, the American light crude oil had dropped by more than 20 per cent since the peak on October 3rd. On Friday, the drop continued for the 10th consecutive day, and that has not happened since July 1984, according to Dow Jones Market Data. Marketwatch writes on Saturday.
The price of the North Sea light crude has dropped $17 a barrel in the last month. Several of the big petroleum and offshore shares have plunged by more than 20 per cent, which is defined as a crack.
A plunge of more than 20 per cent
Kjell Inge Røkke-dominated Aker BP experiences a plunge of 22 per cent, which means that more than NOK 30 billion have vanished in thin air, the pink newspaper Finansavisen writes.
Equinor, AKA Statoil, has experienced a drop of “just” 7.4 per cent, but that corresponds to a decline in valuation of NOK 58 billion.
A third of the market value of the seismic company, Petroleum Geo-Services, is peeled away. TGS-Nopec and Fredriksen’s Seadrill have lost in excess of 20 per cent as well.
Analyst predicts an increase in oil prices
The correction comes after a sharp upturn that lasted until the beginning of October. Up until then, oil prices had climbed from USD 67 to 86. Petroleum and oil service related shares rose accordingly.
Analyst in DNB Markets, Helge André Martinsen, recently released his first oil price analysis. He upgraded the broker’s estimates from USD 68 to 83 for 2019. Since then, the prices have gone down from USD 79 to below 70 a barrel.
– This is an offer-driven decline. The down sale in recent weeks has been driven by OPEC production in October, which was significantly higher than in September. On top of that, comes that production in the USA for August increased by 400,000 barrels a day compared to July. In addition, the United States has been forced to provide eight countries – including China, Japan, South Korea and India – partial exemption from their sanctions against Iran. This places further pressure on the prices, the Oil Analyst tells Finansavisen.
Make a lot of money
Chief Analysist in Clarkson Platou, Eirik Røhmesmo, highlights that despite the drop in prices, petroleum companies earn so much money that he is not concerned about future growth in investments.
Although the oil prices have fallen from USD 85 to under 70 for Brent light crude, the companies have huge margins, and offshore projects still have a very healthy return on capital.