Oil producers have slashed investment by €185bn - Saudi minister
The scale of the global oil and gas industry's spending cuts are making another surge in energy prices possible by diminishing future supply, Saudi Arabia's deputy minister of petroleum and mineral resources, Prince Abdulaziz bin Salman, said.
Investments have been cut by $200bn (€185bn) this year and will drop another 3pc to 8pc next year, marking the first time since the mid-1980s that spending has been cut for two consecutive years, he said in a speech to energy ministers in Qatar. Projects totalling nearly five million barrels a day have been deferred or cancelled, he said.
Just like high oil prices can't last, a prolonged period of low prices is "also unsustainable, as it will induce large investment cuts and reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise," the prince said.
"As a responsible and reliable producer with a long-term horizon, the kingdom is committed to continue to invest in its oil and gas sector, despite the drop in the oil price."
Oil prices declined 42pc in the past year as Saudi Arabia led the Organisation of Petroleum Exporting Countries (OPEC) in maintaining production despite a global glut. Supply from outside the 12-member group will start to decline next year and the drop will accelerate after that, according to his speech. The impact of the current price instability is spilling over into areas such as renewables and natural gas, Prince Abdulaziz said.
Oil prices will probably rebound next year, Suhail Al Mazrouei, the United Arab Emirates' energy minister, told a conference in Abu Dhabi. (Bloomberg)