By Duncan Sutherland - Exclusive to Oil Investing News

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Market News:

Clearly Monday was not particularly good news for oil companies. With futures settling below $90 per barrel, ($87.81 when Benchmark went to proofing) the industry is seeing the lowest prices since February. ^[2]

But prices alone do not represent the entirety of the industry's woes. Though prices have the most immediate effect on companies, a number of troubling factors are contributing to a bleak picture going forward. With lower projected returns, companies naturally scale back on exploration and developing new projects. This has already been observed in marginal or higher-cost areas like shale gas and oil sands.

As demand destruction continues, this tightening of supply is unlikely to be reversed in the short term. The prospects of recession in America and the rather persuasive refutation of the decoupling theory ^[3] by events of the last weeks portend further shrinking of demand and corresponding operation cutbacks.

Oil-dependent markets and currencies were pummeled today, with Saudi Arabia's Tadawul exchange losing 9%, the Canadian dollar sliding and the S&P's TSX Composite Index ^[4] shedding more than 4% of its value. Russia's RTX once again had to shutter operations ^[5] today after the index lost over a fifth of its value.

The next few months are likely to be tough times, but barring complete collapse of the world economy and a return to the barter system, people will still need oil. So don't get too worried!

Company News:

Rumours abound that Royal Dutch Shell (NYSE:RDS.A) is trying to take over Regal Petroleum Plc ^[6]. (LSE:RPT). Regal's focus on Ukrainian exploration must have looked particularly attractive to Shell, as the country is much more politically stable than Iraq or Nigeria. Regal is denying the rumours.

BP, (NYSE:BP) Chevron, (NYSE:CVX) Total, (NYSE:TOT) Exxon (NYSE:XOM) and the rest of the majors all took significant share price hits today, ranging from about 1% (Exxon) to more than 5.5%

International News:

Benchmark is reliably amused by the antics of the world's petrogue states, and this week was no exception.

President Rafael Correa of Ecuador has indicated his displeasure at foreign oil companies ^[7]' inability to boost output numbers. The Presidente threatened to kick out the majors. To underline his seriousness, he also mentioned that Ecuador might nationalise the properties of Petrobras if the Brazilian company continues to drag its heels on transferring some property to the Ecuadorian state.

The Russian government is petitioning Britain to extradite the former head of RessNeft ^[8] to face trial on charges of tax evasion. Britain's long tradition as a haven for rich or influential dissidents from the continent has created friction in Russo-British relations of late, most notably in the case of Alexander Litvinenko ^[9]. With Russia's calculated intransigence in the TNK-BP joint venture over the summer, it is unlikely that Prime Minister Gordon Brown is feeling particularly solicitous to Russia's request.

Finally, Nigeria's continuing privatisation ^[10] of state-owned oil interests has earned the state some N60.74 billion. Benchmark's suspicion is that President Umaru Yar'Adua is not privatising the out of principle, but as a defensive measure, to shore up federal coffers amid diminishing prices and decreased output.