Crude oil rallied at the end of October, but is not expected to sustain the increase into November. WTI opened November at 46.40 having touched a high of
Market interest is keenly watching comments from OPEC members ahead of the all-important annual meeting scheduled on December 4th. Saudi Arabia, the OPEC kingpin, is evaluating steps to balance budget. Riyadh is looking to raise domestic energy prices, said Oil Minister Ali Al-Naimi last week, confirming the kingdom could cut fuel subsidies – often blamed for waste and surging domestic fuel consumption. UAE has already taken a step in this direction and has brought fuel prices in line with the global market prices.
The depleting oil revenues of other important producers such as Venezuela and Mexico are already a cause of real concern to their respective governments. The issue with most remains, how to meet the growing public expenses and aspirations. Global credit rating agency Standard & Poor’s has cut the sovereign rating of oil-rich gulf state Saudi Arabia by a notch to A+/A-1, with negative outlook, as a result of falling national revenue due to plunge in oil prices.
The Organization of Petroleum Exporting Countries’ biggest oil producer relies on oil for about 80 per cent of its fiscal revenue and the rating agency believes that the country’s budget deficit will widen to 16 per cent of gross domestic product in 2015, up from 1.5 per cent last year.
S&P estimates the country’s budget deficits to be 10 per cent of GDP next year, 8 per cent in 2017 and 5 per cent in 2018, based on an average projected oil price of $63 a barrel. Traditionally, the oil rich nation has run fiscal surpluses which averaged 13 per cent of GDP over the 10 years to 2013.
Chevron Corp. on Friday announced it could cut 6,000 to 7,000 jobs and pare its capital spending by 25% next year. Profits of the company too tumbled in the third quarter. For the quarter ended Sept. 30, Chevron reported earnings of $2.04 billion, or $1.09 a share, down from $5.6 billion, or $2.95 a share, a year earlier. Revenue fell 37% to $34.32 billion.
Chevron, the second-biggest US oil company also underlined it expects capital spending of $25 billion to $28 billion in 2016, down 25% from this year’s budget. In 2017 and 2018 too, it expects to cut spending further, to around $20 billion to $24 billion. In the meantime, Marathon Oil Corp. became the first major shale producer to cut its quarterly dividend, reducing it by 76 percent in an effort to prop up cash. holdings. Marathon’s Dec. 10 payout to investors will drop to 5 cents a share from 21 cents, the company said.