Crude oil prices are still under pressure after a volatile Chinese stock market trade and a big miss by BP, wihch reported a loss of $5.8 billion dollars in the second quarter as oil prices plummeted and lost revenue due to maintenance in the Gulf of Mexico and a whopping 432 million dollar write-down due to violence in Libya. BP also had to make 9.8 million dollar write down to the Deep Water Horizon settlement. Yet what may be more important for oil is the proclamation by BP that low oil prices may be here to stay.
Bob Dudley, BP's Group Chief Executive, said, "The external environment remains challenging, but BP moved quickly in response and we continue to do so. Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the Group and we continue with capital discipline and divestments... In the past few weeks oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran. I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future."
Brian Glary, BP's chief financial officer, also commented, "We can see clear progress in our capital programmer and from our work to reset and reduce cash costs. Our focus remains on rebalancing the company's sources and uses of cash in a lower price environment."
While in the short term the world is focused on oversupply, the long term outlook becomes more interesting as big and little oil are making cuts that would make Jack the Ripper blush. As the Financial Times reported yesterday, we have already seen the world's big energy groups cut $200 billion of spending on new oil projects. In other words, the deferral of 46 big oil and gas projects with 20 billion barrels of oil equivalent in reserves which is more than Mexico's entire proven energy reserves.
China's Shanghai Composite closed down 1.7% at 3,663, which was considered a small victory after the Chines state-owned banks unleased its resources to buy, buy and buy. They also are investigating malicious short selling and setup a hotline so you can report suspicious trading or traders.
Natural gas continues to quietly hang in there as the rest of the commodity world goes bearish. The market is reacting to strong demand due to the heat in the eastern half of the country. Look out for tonight's API report!