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Shell posts $8.2bn profit for 2016

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Shell Nigeria boosts domestic gas distribution capacity by 150%

Anglo-Dutch oil major, Shell in its 2016 financial report to be released this week is expected to reveal “profits more than doubled on the back of the recovering oil price”.

Last February, at the nadir of a two-year oil price slump, when the international benchmark Brent crude dropped to $27 a barrel, Shell reported a profit for the previous year of $3.8bn.

That, in turn, came after it posted a shock loss of $7.8bn for the third quarter of 2015, mostly due to a spate of writedowns on big investment projects.

This year, however, analysts expect the company to post a profit of $8.2bn (£6.9bn) for 2016.

“Other oil majors – BP, Exxon Mobil and Total – are expected to follow suit in the coming weeks, unveiling annual profits marking an inflection point for the industry after a brutal two-year downturn,” adds the Telegraph.

Brent crude has rallied from the low-$40s to around $55 a barrel since last November’s deal among the Opec cartel and other major oil producing nations, including Russia, to cut 1.8 million barrels a day from the global output.

At the same time, analysts say the “scale of operating cost cuts since the start of the oil price correction has dramatically lowered the ‘break-even’ market price to $50 a barrel”, reports the paper.

Jason Gammel, an oil company analyst at Jefferies, told the Telegraph “the sector would generate the same cash flow at a $72-a-barrel market as it did in 2013 when the price of oil was almost $110”.

That is important because experts now widely believe environmental laws limiting oil demand could prevent prices reaching $100 again.

For this year, trading is expected to rally further from its current level, although some expect it to struggle to pass $60 due to recovering activity in the US shale oil sector, which several analysts believe could spur a correction for the oil price to back below $50 a barrel.

Biodun Abimbola & Agency Report

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