Investment revival seen after 2 years of cuts
Oil companies are reviving investment after a two-year rout as Organisation of the Petroleum Exporting Countries (Opec) output cuts boost prices, easing but not eliminating the risk of a future supply crunch, said the International Energy Agency (IEA).
There were “signs of a modest recovery” in spending this year following two years of big investment cuts, said the agency in a report on Monday.
The IEA doubled forecasts for production growth outside Opec next year as United States shale producers emerge “leaner and fitter” from the downturn.
Opec and Russia headed an agreement among 24 oil producers last year to clear a global glut, spurring a 20 per cent rally in crude prices. Before that decision, Opec had refused to reduce output on the grounds that any curbs would bail out rival producers.
“Until the agreement was struck, prices threatened to return to the levels seen in early 2016” of less than US$30 (RM133.40) a barrel, said the agency. “Another period of falling prices could have further pushed back critical investment decisions, and threatened the production recovery needed” at the end of the decade, it added.
Investment will increase this year after back-to-back declines of about 25 per cent slashed global investment to US$433 billion last year, according to the IEA, which advises most of the world’s biggest economies on energy policy. The agency had warned in September that investment could drop again this year.
US producers were leading the spending revival, and would contribute most of the growth in supplies outside Opec through to 2022, said the IEA.
Non-Opec supply as a whole would expand by 3.3 million barrels a day in the period from 2016 to 2022, compared with a prediction last year of two million a day through to 2021.