Chevron follows Exxon in slashing capital spending

Covid-19’s seismic effect on the fortunes of tanker owners is beginning to become clearer.

Yesterday American energy major Chevron announced it will cut capital spending by 26% next year and make deep cuts through the middle of the decade, as a result of the Covid-19 pandemic’s industry-wide reappraisal of fossil fuel investment.

Chevron will spend $14bn next year and up to $16bn through 2025, a reduction from the company’s previous spending plans of $19bn to $22bn through 2024 made before the outbreak of the pandemic.

Earlier this week, Exxon said it would reduce capital spending by $10bn to a new level of $25bn per year through 2025.

“Exxon, struggling to pay a dividend, is widely seen to have been particularly hard hit by the pandemic, losing more than $2.3bn in the year’s first three quarters and reducing the book value of its assets by up to $20bn,” analysts from broking house Lorentzen & Stemoco noted in an update to clients today.

On tanker prospects, Danish Ship Finance warned in its latest shipping market review published yesterday: “The short to medium-term outlook is bleak. Global oil demand remains weak, oil inventories are high and fleet availability is set to increase as vessels return from floating storage. The recent rise in coronavirus cases is weighing on the recovery in global oil demand.”

Alphatanker reported this week that floating storage continues to draw steadily and is now one third below its end-May peak.

“Our projections for oil market fundamentals imply that this steady draw will continue over the first half of 2021 which suggests that more tankers will be released from the storage fleet and will enter the general trading pool, pressuring hire rates. Moreover, the oldest tankers from the storage fleet will likely never return to trading and instead will be directly towed to a breakers yard upon discharging,” Alphatanker suggested in its latest weekly report.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
Back to top button