In a report detailing the oil giant’s second-quarter earnings, Shell made it public that it would be cutting between $15 billion and $22 billion from the value of its assets due to the dwindling price of oil and the uncertainty around when or how quickly recovery would come.
Shell also projects that the price of Brent crude oil would average at $35 per barrel through 2020. While Shell agrees that there is a potential to return to $60 per barrel – where it began this year – their prediction puts that possibility around 2023. Recently, the price of Brent crude has seen something of a rebound and is now trading at $41 per barrel. The oil crisis, at its peak, saw it trade at just $20 per barrel.
In its official statement, the company stated:
“Given the impact of COVID-19 and the ongoing challenging commodity price environment, Shell continues to adapt to ensure the business remains resilient.”
This warning from Shell follows a similar publication from BP earlier this month, which was to alert investors to the fact that its assets may be worth $17.5 billion less than previously thought.
The first half of 2020 has seen a significant drop in oil prices, driven significantly by the COVID-19 outbreak and resulting stay-at-home orders that put a grinding halt to air travel and caused a reduction in people’s use of motor vehicles and public transport. Experts also say that market conditions were also notably stressed by the brief price way between Saudi Arabia and Russia in March, which caused a vast inflation in global oil supply. The compendium of stressors in April also saw US crude oil futures reach negative prices for the first time in history.
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