Saxo Group Videos

1.2 Trillion Dollars: The price of cheap oil

1.2 TRILLION Dollars. That's the amount wiped off the market value of companies in the MSCI World Energy Index in just 6 months, according to Saxo’s Peter Garnry.

He warns that as oil prices weaken further, the pain will continue for these companies. He highlights Canadian firm Talisman which is down 50% since June. It’s now agreed to be bought by Spain’s largest oil company, Repsol.

Offshore drillers and equipment providers have also been hit by falling oil prices, with Norway’s Seadrill down 67% since July. But Garnry says oil companies that have diversified, such as ExxonMobil, have only lost 15% of their share price over the same period.

Garnry notes that banks too are exposed, most notably in emerging markets, where they haven’t been able to use the bond markets to transfer the risk to investors. He also says that Canadian banks are vulnerable and could see a 10% drop in overall profitability if low oil prices continue.

02:55 minutes
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