Crude companies gain as China cuts their taxesChina moved to cut oil company tax bills as crude prices headed for the biggest annual decline since 2008, sparking gains by producers led by PetroChina.
China will raise the level for windfall tax on output to $65 a barrel, from $55, starting Jan. 1, according to a Dec. 26 Finance Ministry statement. Nomura Holdings expects China to boost the threshold again to $75 in a year.
“It’s an encouraging policy move by the government because the oil price slump is putting a lot of pressure on cash flow,” Gordon Kwan, Nomura’s Hong Kong-based head of regional oil and gas research, said. “China needs to reduce the windfall profit tax to accommodate struggling producers. Otherwise, there’s a lack of incentive to invest.”
Raising the tax threshold would increase profits of China’s biggest oil companies by at least 10 percent next year, if other factors are unchanged, according to UOB Kay Hian.
Prices have slumped 46 percent this year as members of the Organization of Petroleum Exporting Countries resist supply cuts to defend market share and the U.S. pumps at their highest level in more than three decades.
Brent for February settlement gained as much as 95 cents to $60.40 a barrel on the London-based ICE Futures Europe exchange and was at $59.82 at 2:03 p.m. Sydney time.
PetroChina rose as much as 3.8 percent in Hong Kong, while China Petroleum and Chemical increased as much as 3 percent and Cnooc gained as much as 2.5 percent.
“We are still bearish on the long-term performance of the stocks because of weakening oil prices,” said Shanghai-based UOB analyst Zhou Yinhe. “The 10 percent lift isn’t enough to offset a negative impact brought by the falling oil prices.”
China boosted the threshold from $40 a barrel about three years ago.
with the Korea JoongAng Daily
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