Oil Investors Are $240 Billion Poorer a Week After OPEC Call

OPEC Scraps Production Ceiling, Oil Decline Continues
  • Exxon has lost $11 billion of value, PetroChina $17 billion
  • MSCI World Energy Index headed for worst year since 2008

Investors around the world have seen $240 billion wiped off the value of oil companies in the week since OPEC sent crude prices plunging to a seven-year low by abandoning its output limit.

Companies producing, refining, piping and exploring for oil, along with those that provide them with services, had a market value of about $3.72 trillion as of Friday, compared with $3.96 trillion on Dec. 3, the day before the Organization of Petroleum Exporting Countries’ meeting in Vienna. Exxon Mobil Corp., the world’s biggest oil company, has lost $11 billion of its value and PetroChina Co. more than $17 billion, according to data compiled by Bloomberg.

Crude’s slump has lasted for more than 18 months, making it one of the longest downturns in decades and forcing companies to slash spending, reduce their workforce and delay projects. Energy companies are the worst performers in the MSCI World Index this year, even below miners that have suffered a slump in the price of commodities from iron ore to copper.

“Companies must repeat the same size of cuts they’ve already announced to be able to cope with oil prices this low,” said Alexandre Andlauer, a Paris-based oil industry analyst with AlphaValue SAS. There will be “further lay offs to come with oil at $40 a barrel,” he said.

Chevron Corp., the second-biggest U.S. oil company, said this week its 2016 budget will be 24 percent smaller than this year’s plan. ConocoPhillips will reduce capital spending by 25 percent next year to $7.7 billion, the Houston-based company said Thursday. Industrywide cuts next year may reach $200 billion, according to Eni SpA Chief Executive Officer Claudio Descalzi.

The MSCI World Energy Sector Index, a measure of 107 companies, is down more than 25 percent this year, heading for the steepest loss since 2008. Chevron has lost 23 percent this year while Royal Dutch Shell Plc, Europe’s largest oil producer, is down 35 percent and trading near the lowest since July 2009.

The global oil surplus will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, the International Energy Agency said Friday in its monthly market report. OPEC effectively dropped its production limits at its Dec. 4 meeting, potentially bringing millions of barrels of additional oil to the market as Iran prepares to raise output once sanctions against it are lifted.

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