Americas News
Kilduff Warns of $35 Oil And "Knockout Blow" To Many Companies
A troubling week for oil ended last Friday with dismal second quarter reports from two of the top producers and a dire warning from John Kilduff, founding partner of Again Capital, who told CNBC's Squawk Box that oil is headed towards $35 and that the downturn will be "the knockout blow" for many companies.
Kilduff, who has remained consistent in rejecting the recent prevailing theories that a market rebalance and a sustained recovery of prices is imminent, stated simply that "they're making too much of this stuff" in reference to crude, gasoline, and other products.
He acknowledged that Chinese demand "is okay" and U.S. demand has "been terrific" but insisted it's not enough to prevent "heading back down; I think we'll go as low as $35.
"The next downturn will be the knockout blow; you will see a series of bankruptcies."
Kilduff rationalized this by pointing out that the climb earlier this year back to $50 "Got a lot of companies to hang in there," but that this has been a case of "just keeping the creditors at bay."
Kilduff dismissed reports of growing demand from India as "not enough to move the needle," and he blamed China for "doing to their refining industry what they did to their steel industry: they're about to double their [refined fuel] exports ... and this will flood the market."
As for the impact on bunkers, with both crude benchmarks under $43/bbl at the end of last week, based on current trends Ship & Bunker data suggests a fall to $35 would bring IFO380 bunkers in the primary ports back under $200 per metric tonne (pmt), but not as low as the $150 pmt we saw in February when crude was last at that level.
Meanwhile, Chevron stock was 1.8 percent lower in pre-market trading on Friday upon the company reporting a $1.5 billion loss in the second quarter of 2016, compared with $571 million in profit achieved during the same time last year; revenues were $29.3 billion, down about 27 percent from $40.4 billion in the second quarter of 2015; and cash flow from operations in the first half of 2016 sank over 60 percent year over year, to $3.7 billion.
ExxonMobil's second quarter earnings also fell significantly short of expectations: it earned $1.7 billion, or an adjusted 41 cents per share, compared with $4.2 billion for Q2 2015; analysts had expected earnings per share of 64 cents.
ExxonMobil's Q2 2016 revenues were $57.694 billion versus $74.11 billion in Q2 2015.
Kilduff's strong suit has been his consistent market analysis based on fundamentals: in May, he insisted there would be no rebalance any time soon due to oversupply, coupled with weakening Asian economies, and the state of the U.S. dollar.
