Oil giants' production cuts come to 1 million bpd as they post massive writedowns

The world's five largest oil companies collectively cut the value of their assets by nearly US$50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30per cent worldwide, and still remains below pre-pandemic levels.Several executives said they took massive writedowns because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic that has killed more than 700,000 people.

By contrast, BP took a US$17 billion hit. It said it plans to re-center its spending in coming years around renewables and less on oil and natural gas.Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent by the end of 2030 from its current 3.6 million boepd.

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