RE: Woodside's negative oil price outlook:
Woodside is 34% owned by Shell. Shell plans to slash a lot of jobs from its workforce and close down offices world-wide "in order to help us deal with this low price environment for the foreseeable future".
So, 3-4 weeks ago Shell issued a very pessimistic forecast saying "it sees no recovery in oil prices, and profit margins remain weak".
However, Shell are not closing down offices and laying off staff due to the impact of low oil prices. It is a major review that the new Chairman instituted over a year ago, even before there were low oil prices, because Shell have undertaken to increase the return on their capital employed. Other major companies like ESSO make 15% while the Shell figure is 10%. Shell stated that about eighteen months ago that they were going to try and build up to a return of 12% and this is all part of that. This was going to happen irrespective of any low oil price or not.
Why did Shell (and Woodside's) publish such negative oil price outlooks? They say they fear reduced Asian demand, we haven't seen the worst in Asia yet, the crisis will spread to other parts of the world next year, and so on.
BUT - They aren't really trying to predict oil prices, they have a much more self-serving intention... Look at this:
NEW YORK (Reuters) - October 11. Shell Oil Co., the U.S. unit of Royal Dutch/Shell Group, said Friday it will cut 20 percent from its U.S. exploration and production workforce in the next few months, making it the latest company put on the defensive in the face of severely low oil prices...
They are playing a dirty game, and there's more to come. Shell and Woodside predicting crude prices several years out, believe it if you want.
Woodside predicted a "flood of new production" on the world market in the next decade. Read "Crude Awakening" in Barrons (it was published in January, but as to long term predictions it's just as valid today):
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Tomas |
