The Future of Oil Companies: A Slow Decline
Market watchers are announcing the demise of the oil majors. Not for the first time. According to Jilles van den Beukel, former geoscientist with Shell, the oil companies are indeed seeing their world shrinking. But they are not dead yet: their reason for being – the world’s demand for oil and gas – is still there.
NGO’s refer to the oil majors as slowly moving dinosaurs, sitting on stranded assets that cannot be (fully) produced. They maintain that their shares are massively overvalued and that the majors should rapidly change their business model or perish. Financial analysts are worried about high costs, future oil demand and low reserve replacement ratios. They point out that the companies should prepare for an oil price that stays lower for longer rather than to keep on repeating that the current low oil prices are not sustainable. Are things really that bad for the majors?
Credit rating agency Moody's warned on Tuesday there could be another wave of sovereign and corporate downgrades if a wider global economic slowdown started to take place.
European government bonds extended gains from Monday while the region’s stocks declined as data confirmed economic growth slowed in the second half of 2015, underpinning the case for more stimulus from the European Central Bank.
The Paris-based research body said its gauges of future economic activity—which are based on information available for January—continue to point to slowdowns in the U.S., the U.K., Canada and Russia, but now also suggest growth is set to ease in Germany and Brazil.
U.S. Government Bond Yields Fall as Japan Drops to Record Lows
Government bond yields in Japan on Tuesday fell to record lows, and the ripple effect pushed down yields in the U.S., Germany and the U.K.
Strong auction demand for a 30-year Japanese government bond sent investors piling into bonds. The buying sent the yield on the benchmark U.S. 10-year note below 1.9% again and stalled the yield’s uptick momentum over the past month. As bond prices rise, yields fall.
