In­vest­ment re­vival seen af­ter 2 years of cuts

New Straits Times - - Business World -

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.


The In­ter­na­tional En­ergy Agency ex­pects United States pro­duc­ers to con­trib­ute most of the growth in oil sup­plies out­side Or­gan­i­sa­tion of the Pe­tro­leum Ex­port­ing Coun­tries through to 2022.

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