PROFITS AT two of the world’s biggest oil companies, ExxonMobil and Royal Dutch Shell, have plummeted after tumbling international oil prices and weaker demand for energy battered revenues.
Exxon, the largest US oil group, and Shell, the biggest in Europe, yesterday unveiled post-tax profits for the second quarter that were roughly one-third of those a year ago. Peter Voser, Shell’s chief executive who took over at the start of the month, warned that the company would need to make “substantial” job cuts to restore earnings. He said Shell faced soft demand, excess capacity and high costs.
“Conditions are likely to remain challenging for some time and we are not banking on a quick recovery,” said Mr Voser.
Rex Tillerson, Exxon’s chairman and chief executive, said: “Global economic conditions continue to impact the energy industry both in the volatility of commodity prices and reduced demand for products.”
Both companies blamed the global economic crisis and softer demand for the collapse in their revenues.
The steep fall in profits follows a slide in oil prices from last year’s record high of $147 a barrel to a low of $32. Yesterday, US benchmark crude West Texas Intermediate was trading at about $67.
The effects of volatile prices were evident in Exxon’s 66 per cent drop in net income to $3.95 billion (€2.8 billion), the steepest fall for over a decade, and Shell’s 70 per cent decline in post-tax profit to $3.24 billion.
Politicians in the US and Europe have argued that speculators have contributed to the volatility of oil prices, destabilising the industry and hurting consumers.
Yesterday, the UK’s Financial Services Authority, the markets regulator, summoned leading oil companies, banks, hedge funds and brokers to a meeting to review London’s oil market.
US politicians have complained the London market, home of the benchmark Brent crude oil, is not tightly enough regulated.
The UK regulator’s meeting in London on Wednesday will also involve the British government. It is set to review “whether the current arrangements . . . remain appropriate,” according to a letter sent to market participants.
The meeting comes days after the US Commodity Futures Trading Commission said it intended to clamp down on financial flows into the energy markets.
Gregory Mocek, a former head of enforcement at the commission, said there would be “significant” pressure on other regulators to come into line with the US.
– (Copyright The Financial Times Limited 2009)
