Europe’s Energy Giants Reap Benefits of Oil Price Surge

Anglo-Dutch energy giant Royal Dutch Shell, French peer Total and Spain’s Repsol on Thursday logged surging second-quarter net profits on the back of soaring oil prices.

Rising oil prices can push up inflation and adversely impact the world economy further down the line, but first they translate into rising revenues and profits for energy majors and producer nations, AFP reported.

“The rise in the price of crude is obviously very good news for oil companies,” said analyst Fawad Razaqzada at trading firm Forex.com.

“The higher the price of oil goes, the better the profit margins and revenue would be for oil companies.”

The oil market has been propelled by a December 2016 deal between the Organization of Petroleum Exporting Countries and Russia to curb production.

The price of London Brent crude, which is the main global oil benchmark, has jumped about 50% over the last 12 months to the current level of $74 per barrel.

Fearing an out-of-control spike in prices, OPEC and Russia reached a new deal in June to open the taps.

The buoyant market has nevertheless fizzed higher on output disruptions in oil producers like Iran, Libya and Venezuela.

Royal Dutch Shell announced Thursday that second-quarter net profits quadrupled, energized by high oil prices and asset sales, and launched a vast $25 billion shares buy-back.

Earnings after taxation surged to $6 billion in the three months to June from a year earlier.

The company offloaded $2.5 billion of assets, with disposals in Canada, India, Malaysia, Norway and Thailand.

Shell has undertaken a huge $30 billion divestment plan, as it streamlines its portfolio following the 2016 blockbuster takeover of BG Group.

Markets.com analyst Neil Wilson told AFP that Shell is “reaping rewards of higher oil prices ... and very effective cost cuttingm which has left it far leaner and fitter than when oil was above $100”.

Over in Paris on Thursday, French oil and gas giant Total reported an 83% jump in net profit to $3.7 billion.

The group said it had “benefited fully from (oil price rises) by remaining focused on operational efficiency”.