BP will cut jobs, take $1 billion in charges amid oil slump

The plunging price of oil has taken its toll on one of the world’s largest oil companies: Britain’s BP announced Wednesday it would cuts some of its 84,000-member worldwide workforce, as well as take $1 billion in charges over the next five quarters.

The New York Times reports that most of the financial hit will come in the form of severance pay, indicating that the number of job cuts could be significant. The company didn’t say how many positions it intended to shed.

The price of Brent crude has fallen some 40 percent since June. The price per barrel dropped another 1.5 percent Wednesday, to $65.32.

Bloomberg reports that BP’s move is the latest to come amid the price squeeze:

Europe’s third-biggest oil company by market value joins larger rivals Royal Dutch Shell Plc and Total SA in restricting budgets and offloading operations as margins are squeezed by the 40 percent drop in prices since June. BP said in October that about $1 billion to $2 billion may be cut from the $24 billion to $26 billion of planned capital expenditure in 2015.

Oil falls again, bank says floor could be as low as $43

The price of Brent crude dropped $1.77 a barrel on Monday, to $67.30. Earlier in the day it had hit $66.77, its lowest mark since October 2009.

BBC News has coverage here, and CNBC here.

Traders reacted to a report from Morgan Stanley citing fears of a global oversupply. According to BBC:

Morgan Stanley predicted that Brent would average $70 a barrel in 2015, down $28 from a previous forecast, and be $88 a barrel in 2016.

The investment bank also said that oil prices could fall as low as $43 a barrel next year. Analyst Adam Longson said that markets risked becoming “unbalanced” unless the OPEC producers’ cartel decided to intervene.

Oil makes biggest one-day price jump in 2 years

Have we seen the bottom of the great oil-price plunge of 2014?

Experts say not yet. But oil prices rose sharply Monday, making their biggest jump in two years: Nymex crude-oil futures rose 4.78 percent, to $69.31 a barrel. And Brent crude, the international benchmark, rose 3 percent, to $72.54. It had been down as low as $67.53 earlier in the day, the lowest it’s been since July 2009.

Oil is down about one-third since June, and late last week the commodity plunged even more precipitously after OPEC announced it would not stem the price drop by ramping up production among its 12 member nations. But some analysts saw Monday’s jump as merely profit-taking after last week’s sell-off.

From The Wall Street Journal:

… many market watchers were skeptical that Monday’s gains signaled that oil prices had reached their bottom, pointing to global supplies that continue to overwhelm demand.

Many investors and analysts believe with OPEC on the sidelines it will take cutbacks by companies in the U.S. and Canada to bring supply and demand in line and pull the market out of its swoon. That day may not come until deep into 2015 or beyond, some analysts say.

From Reuters:

“The market clearly got a little overdone to the downside and now it’s coming back up, proof that there will be a response from the shale patch to these low prices,” said John Kilduff, partner at energy hedge fund Again Capital in New York. “Several shale companies are already reporting capital expenditure reductions next year as their profit margins get thinned out.”

On Wall Street, shares of shale energy companies such as Denbury Resources (DNR.N) and Newfield Exploration (NFX.N) took a beating for a second straight session, down about 5 percent each in late afternoon trade.

Data reviewed by Reuters on Monday showed the new low-price environment for oil might have started affecting U.S. shale production, with a 15 percent drop in permits issued for new shale wells in October.

OPEC stands pat … will $70 oil be the new normal?

The big news in the international oil markets last week was that OPEC decided not to cut production, which would have propped up free-falling prices, at least temporarily.

OPEC’s non-action sent oil prices falling further Friday, with the Brent benchmark slipping below $70 for the first time in four years.

NPR reports that some experts say oil in the range of $70 a barrel could last through 2015:

Igor Sechin, the head of Russia’s Rosneft, says he thinks oil prices will average $70-75 per barrel through 2015. That prediction was in line with what Bill Hubard, chief economist at, told Reuters: “I think $70 a barrel will be the new norm. We could see oil go considerably lower.”

Some OPEC member nations, including Iran and Venezuela, which need a higher oil price to pay for their generous public services, had been pushing for the cartel to ease back on production to halt the plunge in prices. A moderate pullback would have come amid a global oil glut, thanks in part to reduced demand in Asia and Europe, as well as soaring production in the U.S.

Iran’s oil minister, Bijan Namdar Zanganeh, said OPEC’s decision was no guarantee that the United States would scale back production in North Dakota and Texas, a surge aided by advances in hydraulic fracturing.

“High prices are a disadvantage to OPEC’s market share,” Zanganeh said, according to Bloomberg. “If you want to increase your share, you have to reduce prices, but you can’t do it through ‘shock therapy’ over the course of three months if you want to change everything.”

Brent crude falls below $80 for first time since 2010

The price of Brent crude, the global benchmark for oil, dropped Wednesday below $80 for the first time since 2010.

As Financial Times points out, the price fell despite OPEC announcing that crude output had declined by about 230,000 barrels a day in October, compared with September.

But markets didn’t perceive this as a deeper change in policy and instead focused on comments made by Saudi Arabia’s oil minister, Ali al-Naimi.

Mr. Naimi broke months of silence on Wednesday to speak publicly about the Gulf nation’s stance on the oil market.

He kept mum on whether Saudi Arabia would cut output to remove surplus oil from the market in response to dramatically lower Brent crude prices. However he dismissed claims that it had triggered a “price war”.

“Talk of a price war is a sign of misunderstanding, deliberate or otherwise, and has no basis in reality,” Mr Naimi said, according to Reuters. “We do not set the oil price. The market sets the prices.”