OIL AND GAS: MATTHEW JONES
ByLine: By MATTHEW JONES
Stronger than expected world energy prices enabled most oil and gas companies
to report bumper profits in the 2003/04 fiscal year. But the sector was also
the focus of attention for other reasons, with corporate crises at two of the
industry's biggest groups - Royal Dutch/Shell and Yukos of Russia -
gaining a large share of the headlines.
Average crude oil prices reached their highest for two decades, driven by
market management by the Organisation of Petroleum Exporting Countries and a
recovery in oil demand as global economic activity strengthened. This helped
the sector increase its overall market capitalisation from Dollars 1,108bn to
Dollars 1,423bn.
Benchmark Brent crude oil averaged about Dollars 29 a barrel compared with
Dollars 25-Dollars 26 a barrel the previous year. Increasing tensions in the
Middle East linked to violence against oil installations in Saudi Arabia and
Iraq recently pushed US crude oil futures higher still, touching Dollars 40 a
barrel, the strongest level since the first Gulf War more than 13 years ago.
This prompted the Paris-based International Energy Agency, the west's
energy watchdog, to warn Opec to increase production following the
cartel's 1m barrel a day cut in output at the end of March.
US and UK natural gas prices were also significantly higher in 2003 than the
previous year, while oil refining margins, though weak towards the end of
2003, were overall better than average historical levels.
At the top of the sector, ExxonMobil of the US extended its lead as the
biggest oil group and maintained its position as the third most valuable
company overall by market capitalisation. The feat was achieved by combining
the group's focus on cutting costs with a relatively robust performance
in replacing oil and gas reserves and increasing production volumes.
An extended version of this report is available online at
www.ft.com/ft5002004
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