Services fear clips China Oilfield share price

PUBLISHED : Friday, 08 August, 2008, 12:00am
UPDATED : Friday, 08 August, 2008, 12:00am

China Oilfield Services' share price fell as much as 10.4 per cent yesterday as investors feared a sharp correction in energy prices would result in lower spending on services by oil and gas firms.

The mainland's dominant oil drilling service provider traded as low as HK$9.60 before rebounding to close at HK$10.42, down 2.8 per cent from the previous close.

Crude futures on Wednesday tumbled to as low as US$117.11 a barrel in New York, down 20.5 per cent from a record high of US$147.27 seen on July 11.

Profits at oilfield services providers are less sensitive to falling oil prices than at oil producers as they spend more on exploration to make up for slower output growth and to maintain reserves as more cost-effective projects become harder to find.

In a report, CLSA head of China energy research Gordon Kwan, believes the price of oil will stabilise at a high level after the current correction before breaking fresh records, as global oil supply growth will lag behind demand.