News

November 15, 2008

That Was The Week That Was ... In The UK Oil Equities Markets

By Daniel O’Sullivan

A hell of a lot can change in nine months. A child can grow from conception to birth. Less auspiciously, if you are oil giant BP, you can be torn rudely from a nice, warm womb of triple-figure oil prices to emerge blinking into the harsh, unforgiving light of a world in which the new ‘long-term’ project planning price of US$60 per barrel that you officially adopted with a fair amount of fanfare just in February - is already at least some five per cent ahead of where oil actually is right now. Or 13 per cent depending on which price you prioritise. At the time of writing, benchmark US crude is hovering around US$57, but Brent - the more global reference price, even if less commented on in newswires and the pink paper - has plunged to US$52.

But we can’t be too harsh on BP. Eons ago in February, chief exec Tony Hayward denied that the new, higher, planning price was just a fig-leaf to cover BP’s belated, first and to date only Canadian oil-sands buy-in. He emphasised that projects were still stress-tested at US$40 in any case. We believe him - precisely because we thought the new planning price was just too conveniently coincident with the Canadian deal. And of course rival Royal Dutch Shell is far, far deeper in sticky brown stuff...