4 Big Buyers Cut Oil Prices; 13 Firms on ‘Creditwatch’
Four U.S. oil companies announced cuts Tuesday in the amount they will pay for domestic crudes, and a top debt-rating agency said it is studying the credit-worthiness of 13 petroleum-industry companies because of concern about their financial future in a declining market.
Prices in the spot and futures markets were relatively stable after falling sharply Monday.
Texaco, the country’s third-largest oil company, said it reduced its postings, the contract prices paid to producers, by between $1 and $2 per 42-gallon barrel of various grades of crude, retroactive to Monday.
Atlantic Richfield said it reduced postings by $1.50 a barrel retroactive to Friday; Diamond Shamrock said it reduced postings 50 cents to $1.50 effective Tuesday, and Marathon said it reduced postings $1 to $1.50 effective Monday.
For Texaco and Arco it was the second such reduction this month and followed similar cuts by other major U.S. oil companies. An Arco statement said the step was taken because of “competitive pricing and market pressures.”
The postings remain several dollars above the spot and futures prices and are now in the $20- to $23-per-barrel range, compared to about $29 per barrel at the beginning of this year.
Standard & Poor’s, a major credit-rating agency, said in a statment that it had placed 13 oil and oil service companies on “creditwatch with negative implications,” meaning that it might downgrade their credit ratings, making it more difficult for them to borrow money.
“Even though declining oil prices increase the business risk of all oil and gas and oil service companies, these 13 companies are particularly vulnerable because of past financing or operational strategies,” S&P; said. “Their common traits are aggressive leverage structures, uncertain cash flows, or both.”
The companies include Diamond Shamrock, Phillips Petroleum, Freeport-McMoran and Kerr McGee.
On the New York Mercantile Exchange, the price for March delivery of West Texas Intermediate, the best-known U.S. blend, closed at $16.55 a barrel, down 23 cents from Monday but above the seven-year low of $15.44 set a week earlier.
In London, oil industry sources said Egypt had cut the export price of its key Suez blend crude by $3.70 a barrel to $19 for immediate delivery.
Prices on the open market have dropped by half since November because of a struggle for market share between the 13-member Organization of Petroleum Exporting Countries and non-OPEC producers, notably Britain, Norway and Mexico.
Richer OPEC countries, led by Saudi Arabia, have flooded the market with cheap oil in attempts to force non-OPEC competitors to scale back their production levels, so far unsuccessfully.
