Coronavirus News Asia

Oil price rally belies hard Covid-19 realities

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While global oil prices rise after a historic collapse, there is little if any supply or demand indication that the speculative spike is sustainable.

As Big Oil companies’ first quarter (Q1) results start to stream in, it’s just as likely the bad earnings news leads to an even more profound drop into the single digits.

PetroChina and Sinopec both announced troubling pandemic-hit earnings in Q1, deflating certain hopes that China’s super oil majors might help to sustainably lift deflated global oil prices.  

PetroChina, China’s largest oil and gas producer, reported a Q1 net loss of 16.2 billion yuan (US$2.29 billion), compared to a profit of 10.3 billion yuan over the same period last year.

The oil major’s Q1 revenue dropped some 14.4%, despite a 4% increase in crude oil production and an 8.7% rise in natural gas output. The company blamed its dismal quarterly results on the coronavirus and a “significant increase in instability and uncertainty.”

Sinopec, China’s largest oil refiner by capacity, reported a Q1 loss of 19.8 billion yuan ($2.8 billion) after a profit of 14.8 billion yuan over the same period a year earlier. Its refinery segment was hit particularly hard, as fuel demand in China collapsed due to Covid-19’s impact.

Both PetroChina’s and Sinopec’s Q1 2020 releases came the same day that global oil markets rallied, at least temporarily shrugging off the gloom and doom of recent trading sessions.

Sinopec technicians check facilities at a natural gas storage area in Puyang, Henan province in a file photo. Image: Twitter

On Wednesday (April 29), global oil benchmark Brent crude rose some 8.5% to $22.80 per barrel. In early trading in Asia on Thursday, Brent nearly hit $25 per barrel.

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