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BHP Billiton hit hard by Chinese economic decline

Australian mining giant BHP Billiton says Chinese weakness behind major slump in revenue. FIle Photo by UPI Photo/Stephen Shaver MELBOURNE, Aug. 25 (UPI) — An oversupplied crude oil market and a slowing Chinese economy helped drag revenue down for the period ending June 30, Australia’s BHP Billiton said Tuesday. BHP reported revenue from continuing operations down 21.4 percent for the period, total revenue down 22.2 percent, and capital spending down 24 percent for the period compared with last year. The Australian company said it was taking a reigned in approach moving forward, cutting spending next year by 22 percent to $8.5 million and another 17 percent from there to $7 billion in 2017. Profits after tax for the year ending June 30 declined 85 percent to $1.9 billion. Energy companies are struggling to generate cash while lower crude oil prices crimp operating expenses. Crude oil prices are at historic […]

Posted On : Published By : Tom Whipple
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China Eases but Stench of Crisis Remains

At least Beijing isn’t wasting its crisis. China fired a double-barreled easing shot after its stock market plunged yet again Tuesday. This included an interest-rate cut and a reduction of bank reserve-requirement ratios, both aimed at both cushioning the stock-market fall and spurring the real economy. But in a significant long-term move, the central bank took another step toward liberalizing interest rates. The People’s Bank of China said banks would now be free to offer what they wanted on rates for one-year deposits. These apply to accounts in which savers must keep their money in the bank for a year, similar to a certificate of deposit. That follows a move in May, when the PBOC gave banks additional leeway—though not total freedom—to set deposit rates on short-duration deposit accounts. Letting banks set their own deposit rates is the final step in China’s shift from a command-and-control banking system to […]

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Cnooc First-Half Profit Drops 56% on Plunging Crude Prices

Cnooc Ltd., China’s biggest offshore oil and gas explorer, posted a 56 percent decline in profit for the first half of this year. Net income dropped to 14.73 billion yuan ($2.3 billion), or 0.33 yuan a share, from 33.59 billion yuan, or 0.75 yuan, a year earlier, the Beijing-based explorer said in a statement to the Hong Kong stock exchange Wednesday. That exceeded the 13.9-billion yuan average of three analyst estimates compiled by Bloomberg. Cnooc, which depends purely on oil exploration and production for revenue, is most exposed to oil’s plunge this year and must rely on cost cuts and capital spending curbs to boost profit, said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. The strategy paid off last year, when it posted a surprise 6.6 percent profit increase. Brent crude has averaged about $59 a barrel in the first half of the year, down 45 […]

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Political Risks May Foil Economic Reform in China

Photo A migrant worker shields her face at a construction site in Shanghai. China’s five-year plans have given local government officials a single goal: Grow. Credit Aly Song/Reuters Can China pull it off? A couple of weeks ago, the International Monetary Fund told the world that China was essentially doing O.K. It is “transitioning to a new normal,” the I.M.F. said in its regular economic assessment , toward “slower but safer and more sustainable growth.” The main risk, it argued, was that the Chinese government’s push for economic reform might prove “insufficient.” It seems this is a pretty big risk. Financial markets were shaken by China’s decision to abruptly devalue its currency on Aug. 11, days ahead of the publication of the I.M.F. report. For all the I.M.F.’s assurances that this was a minor adjustment after a sharp appreciation of the currency until then, a welcome step that “should […]

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China’s Party-Run Media Is Silent on Market Mayhem

Photo Tuesday’s People’s Daily did not mention the stock markets. Credit The New York Times HONG KONG — After China ’s stock markets crumpled , prompting a global sell-off, People’s Daily, the premier newspaper of the Chinese Communist Party, had other things on its mind. There was no mention of the market mayhem on the newspaper’s front page on Tuesday, when it featured a report about economic development in Tibet. Indeed, there was not a single reference to the stock markets throughout the entire 24 pages of the paper, which dwelled instead on the forthcoming 70th anniversary of Japan’s defeat in World War II. The silence continued on Wednesday, when the paper again did not report on the stock market upheavals, although it did have articles about Chinese central bank decisions and Prime Minister Li Keqiang’s restatement of confidence in the broader economy, despite the effects of what he […]

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Glut of Chinese Steel Looms Large

The world’s biggest producers of iron ore have a problem, and it lies in the steel that has already gone into China’s cars, bridges and skyscrapers. On Tuesday, BHP Billiton, the world’s biggest miner, lowered its long-run forecast for peak China steel demand to between 935 million and 985 million metric tons from one billion to 1.1 billion tons. China’s annual production is currently at about 800 million tons. This historic glut of Chinese steel, and concerns over the country’s economic prospects, have hurt prices for iron ore, the biggest ingredient in steelmaking. The commodity has fallen to roughly $50 a ton from $190 a metric ton in 2011, squeezing the profits—and share prices—of the world’s biggest mining companies. The S&P mining index has declined to 18.33 from above 70 over that stretch. China accumulated so much steel so rapidly that the total amount of steel in the economy […]

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Why China’s Thirst for Oil Can’t Lift Prices

SINGAPORE—Oil prices haven’t proved immune as commodities prices tumble amid jitters about China’s economy, with key global benchmarks trading around six-year lows . That is despite Chinese crude demand remaining remarkably robust. Chinese oil data might even be expected to be pushing up prices. The country’s crude imports jumped 22% in July compared with a year ago, to 7.25 million barrels a day, according to customs data. That sort of surge might prove unsustainable, but China’s oil imports could still rise by over 7% this year, according to Citi Research. China’s oil thirst looks all the stronger when compared with its appetite for other energy sources. Demand for coal in the world’s second-largest economy has slipped this year, for example. Even so, oil-market participants blame China for the latest leg-down in oil prices. The selloff was triggered by the plunge in China’s stock markets and the yuan’s devaluation earlier […]

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BP restarts crude unit at Whiting refinery

BP PLC has restarted the largest of three crude distillation units (CDUs) at its 413,000-b/d refinery in Whiting, Ind., following the unit’s unplanned shutdown in early August for unscheduled repair work ( OGJ Online, Aug. 18, 2015 ). The processing unit, which shut down on Aug. 8, has returned to service and has resumed production of fuel, BP said. While restart of the unit is helping to increase the refinery’s overall fuel output, the 250,000-b/d CDU will continue to ramp up to its full processing capacity over time, BP said. The company did not disclose an estimate of when the unit would return to planned processing rates. The rest of the Whiting refinery remains in full operation at scheduled rates, and despite a still-reduced fuel production at the site, BP said it continues to meet its contractual fuel supply obligations to customers. Following the CDU shutdown, US congressional representatives […]

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Signs, Long Unheeded, Now Point to Risks in U.S. Economy

Photo Awaiting the opening bell at the New York Stock Exchange. Credit Justin Lane/European Pressphoto Agency As investors scramble to make sense of the wild market swings in recent days, a number of financial experts argue that, for more than a year now, signs pointing to an equity crisis were there for all to see. The data points range from the obvious to the obscure, encompassing stock market and credit bubbles in China, the strength of the dollar relative to emerging market currencies, a commodity rout and a sudden halt to global earnings growth. While it would have been impossible to predict the precise timing of the last week’s downturn, this array of economic and financial indicators led to an inescapable conclusion, these analysts say: The United States economy would only be able to avoid for so long the deflationary forces that have taken root in China. And if […]

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For Oil Producers Cash Is King, and That’s Why They Just Can’t Stop Drilling

Investors sent a surprising message to U.S. shale producers as crude fell almost 20 percent in August: keep calm and drill on. While most oil stocks have fallen sharply this month, the least affected by the slump share one thing in common: they don’t plan to slow down, even though a glut of supply is forcing prices down. Cimarex Energy Co. jumped more than 8 percent in two days after executives said Aug. 5 that their rig count would more than double next year. Pioneer Natural Resources Co. rallied for three days when it disclosed a similar increase. Shareholders continue to favor growth over returns, helping explain why companies that form the engine of U.S. oil — the frackers behind the boom — aren’t slowing down enough to rebalance the market. U.S. production has remained high, frustrating OPEC’s strategy of maintaining market share and enlarging a glut that has […]

Posted On : Published By : Tom Whipple