It has been another crazy fortnight
in the crude markets, with Brent not only having retreated from $70 per barrel,
but trading below $65, as the Oilholic pens his thoughts.
In any case, having a
$70-plus six-month price target is increasingly odd, given the current set of
circumstances, let alone a projection by
Goldman Sachs of $82.5 per barrel, as one recently wrote on Forbes.
That said, a possible
Saudi-Russian, or should we call it a R-OPEC, reaffirmation of keeping oil production down, accompanied
by constantly rising Indian oil imports and stabilising OECD inventories,
should give the bulls plenty of comfort. Let’s also not forget the global economy is
growing at a steady pace across all regions for the first time since the global
financial crisis.
The aforementioned do count as
unquestionable upsides for the oil price. But here’s the thing – should you believe in average
global demand growth projections in the optimistic range of 1.5 to 1.7 million
barrels per day (bpd); such growth levels could be comfortably met by growth in
non-OPEC production alone.
For the moment, there’s little
afoot to convince the Oilholic to change his view of a $65 per barrel average Brent
price, and $60 per barrel average WTI price for 2018. So what impact would this
have on ‘Big Oil’.
Interestingly enough, Morgan
Stanley flagged up the 'curious case' of Big Oil dividend growth in a recent
note to clients, pointing out that despite recent share price declines influenced
by crude market volatility, unexpected dividend growth is still being achieved by European oil majors thanks to rapidly improving financial performance.
According to the global
investment bank, in 2017, Royal Dutch Shell, BP, Total and Statoil generated
$29.6 billion in organic free cash flow; the highest level since 2009. Return on
average capital employed is also improving and balance sheet gearing is falling
as well.
“Several management teams were
willing to translate stronger cash generation in dividend increases", Morgan
Stanley added.
The investment bank opined
that Statoil’s cash flow and dividend growth remain impressive, so do BP’s,
but noted that the latter will not be able keep up with Total and, ultimately,
Shell on dividend growth.
Hard to keep up with Shell in
any case; the Anglo-Dutch giant has a sterling record of regularly and
dutifully paying dividends dating all the way back to the Second World War. That’s
all for the moment folks! Keep reading, keep it ‘crude’!
To follow The Oilholic on Twitter click here.
To follow The Oilholic on Google+ click here.
To follow The Oilholic on Forbes click here.
To email: gaurav.sharma@oilholicssynonymous.com
© Gaurav Sharma 2018. Photo: Oil well in Oman © Royal Dutch Shell.
No comments:
Post a Comment