Big oil, big write-downs. It’s Big Oil’s week for quarterly reports, and according to some analysts there are going to be some shockers. The Financial Times warmed up the market overnight with an article pointing out that big oil companies (Seven Sisters and all) have already this year cancelled US$200 billion of projects as the oil price slides for a second time this year. The paper said the cuts were made to protect returns to shareholders, such as dividend, which adds to the belief that more and more companies are favouring shareholders (which, in many cases, include senior managements) over investing for the future. Reporting this week are the likes of BP, Shell (and its wedding partner, BG Group), Chevron, ConocoPhillips, Total, ExxonMobil, Murphy Oil and a host of smaller players, especially in the US shale gas and oil sectors.
As well, the quarterly results from chemicals giant DuPont will tell us how oil and gas consumers are benefiting, but are (if they are US-based) being hurt by the higher dollar (which is adding to the financial pressures on these oil giants). Among those cancelling or delaying work are Santos and Woodside in Australia, Shell, BP and Statoil, the huge Norwegian state-owned company. Shell’s marriage to BG group (worth well over A$110 billion at current exchange rates) remains to biggest consolidation deal in the sector, and has oddly not been followed by more similar deals. The FT says Shell will reveal cuts to its already much reduced US$33 billion estimate for 2015, while Total and BP are believed ready to detail their cost savings in recent months, along with all other companies, large and small. World oil prices continued falling overnight to four-month lows, adding to the pressures. — Glenn Dyer
China off coal. Chinese coal production was down 5.8% in the six months to June, while imports tumbled more than 37%, according to official data published on Chinese government websites over the weekend. China’s coal production fell 5.8% in the first half of 20-15 from the same period of 2014 to a still-massive 1.79 billion tonnes. That was after a smaller 3.5% drop to 850 million tonnes in the March quarter. If the falls continues at this rate to the end of the year, China will have two consecutive falls in annual output — a rarity. China imported 99.87 million tonnes of coal in the six months to June, down 37.5% from the same period last year. Coal still accounts for 60% of China’s power generation. — Glenn Dyer
Nor does China like shares, again. All eyes will be turned to the north and China’s sharemarkets today after they reboarded the bear train again and reminded the world that the country’s sharemarket slide has only been hibernating in the fortnight since everything nearly went to hell in a hand basket. The near 8.5% slide (half a trillion US dollars) yesterday dragged markets around the world lower, coming on top of Friday’s 1.3% fall. Wall Street, Europe all dropped noticeably (Wall Street for the fifth day in a row). US oil futures fell under US$48 a barrel overnight to new four-month lows, the Aussie dollar traded well under 73 US cents, copper fell to new six-year lows, but gold popped and iron ore prices rose. Fear and loathing again. But it’s the struggles of the Chinese government to keep a lid on the market’s volatility, despite spending an estimated US$200 billion on stabilising the bourses after the slide earlier this month, which returned to the fore for investors around the world yesterday. And gold popped. The fall took everyone by surprise, judging by the plethora of possible explanations, which included rising pork prices.
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The best bet is the recent recovery in share prices brought a rising tide of sellers into the market looking to cover their losses and they eventually overwhelmed the few buyers (turnover is now 40% of what it was in the last days of the boom). The Mandarin Chinese word for bear is Xiong. You don’t see that very often on government websites in stockmarket stories, especially now. But you do see warnings against the “malicious shorting of stocks”, as we saw overnight from China’s securities regulator, which also denied that there had been any weakening of the recent share support buying. The regulator, in a statement on Monday night, made it clear it was prepared to buy shares to stabilise the market and avert “systemic risks” in the wake of yesterday afternoon’s big plunge. All those moves to halt the rout earlier this month are now looking weak (and remember the government almost lost control of the rout). Is there a Chinese phrase for King Canute and the sharemarket rout? — Glenn Dyer