CNPC Says Oil Slump Makes Meeting Profit Target DifficultRakteem Katakey
China National Petroleum Corp., the country’s biggest oil and gas producer, said it will have difficulty in meeting its profit targets this year because of crude oil’s slump this month.
The state-run company, which also refines crude to produce fuels, expects oil prices to decline further this quarter, it said in a statement on its website today. Lower rates would reduce its earnings from oil sales and cut the value of its product inventories. The company said those stockpiles remain high.
The CNPC statement is no longer on its website. Three calls to CNPC’s press office seeking comment on the statement weren’t answered.
The view on the oil price in CNPC’s statement echoes that of Nomura International Hong Kong Ltd., which said today that U.S.-traded crude has the potential to drop below $70 a barrel by the end of the year if OPEC fails to cut production. That would push prices to a level last seen in June 2010, and narrow refining margins in Asia as the value of stockpiles maintained by refiners decline.
Falling prices could “crush Asian refiners’ margins” if demand for oil remains weak, Gordon Kwan, Nomura’s Hong Kong-based head of regional oil and gas research, said in an e-mail. Oil demand growth in China, the world’s second-biggest consumer, is expected this year to be the weakest since 1990 as economic growth slows, Sanford C. Bernstein analyst Oswald Clint wrote in a report yesterday.
The International Energy Agency this week cut its global oil demand forecast further, saying growth this year will be the weakest since 2009. Lower demand is already narrowing refining margins across Asia. Profit from making diesel in Singapore, a regional benchmark, has averaged $14.25 a barrel this month, compared with $16.53 a barrel in October last year and $18.20 a barrel in January 2014, according to data from PVM Oil Associates Ltd. in London.
Brent crude in London, a benchmark for more than half the world’s oil, has dropped 27 percent since the beginning of July, the biggest four-month slump since 2008, when a financial meltdown drove it below $40 a barrel. The price of Brent today was hovering just above $85 a barrel.
West Texas Intermediate prices in New York have dropped 16 percent this year as the U.S. increases oil output from shale rocks. The November contract was at $82.83 a barrel in electronic trading on the New York Mercantile Exchange, up 1 percent, at 8:51 a.m. London time.
Some of the world’s biggest banks including Bank of America Corp. and BNP Paribas SA are predicting the slump in prices may be near an end, in part because OPEC may cut output. The group is scheduled to gather on Nov. 27 in Vienna. Brent will trade at $104 a barrel in the first quarter of 2015 and $102 the next quarter, according to the median estimate of 25 analysts compiled by Bloomberg.
CNPC is the parent of Hong Kong-listed PetroChina Co. PetroChina met forecasts with a 4 percent increase in profit in the first half ended June 30 after it sold natural gas at higher prices, helping offset a 3.4 billion yuan operating loss in its refining and chemicals businesses.
The company may report net income of 138.3 billion yuan in the year ending December 31, according to the average estimate of 16 analysts surveyed by Bloomberg. That’s 6.8 percent higher than the year earlier. In its website statement, CNPC didn’t say what its profit target is for 2014.