Stagnant resource prices are eroding earnings at Southeast Asian energy giants, with the impact rippling to the financial sector here as well as housing and auto sales in Malaysia.
New York crude oil futures fell below $30 a barrel for the first time in 12 years at the start of 2016. Despite signs of a market recovery, crude remains in the 40s. Oversupply and lackluster demand are loosening the market, also pushing down prices of such other resources as coal and palm oil.
Even though many Southeast Asian countries are net importers of resources, the slumps by energy companies with significant influence over the economy are causing a negative chain reaction.
Low energy
At Malaysian state oil company Petronas, net profit plunged 96% on the year in the April-June quarter. Output increased 3%, but revenue dropped roughly 20% on lower prices. Petronas had invested aggressively back when oil was high and is now paying the piper. CEO Wan Zulkiflee Wan Ariffin expresses a sense of urgency, saying the company cannot be optimistic about the future.
Thai public oil company PTT's net profit rose 5% for the April-June quarter, but its sales shrank around 20%. Indonesian coal giant Adaro Energy's revenue declined 16% for the January-June half.
Chinese imports of crude oil decreased 26% on the year in dollar terms for the January-July period. As uncertainty over the global economy grows, demand is unlikely to pick up sharply.
So to restore earnings, the companies are finding themselves having to curb investment and take other restructuring steps. Petronas has decided to reduce capital and operating expenditures by 50 billion ringgit ($12.2 billion) over the four years starting in 2016. PTT has cut its planned investment for 2016 by 7 billion baht ($202 million).
Big impact
Energy companies are among the largest corporations in their countries. In Malaysia, an estimated 4,000-plus companies are dependent on orders from Petronas. Offshore oil driller UMW Oil & Gas saw revenue plunge nearly 60% on the year and bled a net loss for the January-June period.
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