What’s Going On Here?Shares of BP, the world’s fourth-largest oil company, slipped 4% on Tuesday after it reported a slide in its quarterly profit. What Does This Mean?BP’s third-quarter profit was 41% lower than the same time last year – but even that was better than investors expected. Oil prices are lower now than they were a year ago, which meant BP made less from its black gold. That was only partly made up for by earnings from the company’s refining business, which turns crude oil into products that businesses and individuals can actually use.
With global economic growth slowing – and demand for oil dropping as a result – there’s oil slick ahead for BP and its competitors, which could find it harder to grow future profits. Why Should I Care?For markets: Refining those refinery estimates.
About a third of BP’s profit comes from refining, compared to between a quarter and a third for a few of its rivals. Investors might look at the size and performance of those refinery businesses to see if they’ll be able to weather falling oil prices and declining demand too. But given all this competition, profit margins in the refinery business might yet come under pressure – so it might not stop some oil firms falling short of expectations. Just look at Shell, Total, and Chevron’s shares, all of which fell on Tuesday.
The bigger picture: Welcome to the party, Aramco.
According to reports on Tuesday, Saudi Aramco – the state-owned oil firm and the world’s most profitable company – will kick off the initial public offering process next week. It’s aiming to raise $20 billion in one of the largest stock market listings ever. First up, investors will meet with company analysts (and the company itself) to determine how much they think a share of Saudi Aramco is worth. And if the company’s happy to sell shares at that price, it’ll have listed by December and you’ll be able to buy (and sell) its shares. |
