TurnKeyOilStocks (34.18)

Decreased Oil Prices And Decreased Crude. Now Decreased Profits?

August 11, 2011 – Comments (2) | RELATED TICKERS: HAL , SLB , NE

WTI has dropped below $80 in the past week. The market forecasts for many are not looking to hot at this point. With this fall in the market, a fall in the oil demand followed. How will this effect profits? Paul Ausick does a bit of analysis and research to answer this very question. 

 "The lowered demand estimates should moderate pump prices in the US and the rest of the world, but will certainly hit profits at major oil producers like Exxon Mobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX), ConocoPhillips Corp. (NYSE: COP), and BP plc (NYSE: BP). The largest contributor to big profits at these companies has been high prices for crude and for gasoline. They will still earn profits at $80-$85/barrel, just not as much. A drop to $75/barrel would be closer to the bone, and anything below that for an extended period of time could spell trouble.

The integrated oil companies’ refining operations will make up some of the difference, as their input costs will fall with the price of crude. Pure downstream outfits like Valero Energy Corp. (NYSE: VLO), Tesoro Corp. (NYSE: TSO), and Western Refining Inc. (NYSE: WNR) should also see a rise in profits, but the increase will be more modest, especially if the near $20/barrel differential between WTI and Brent closes."