The global oil industry is set to repeat this year’s $200 billion of investment cuts in 2016, raising even more concerns than the current slump in crude prices, according to the chief executive officer of Italy’s Eni SpA.
“What is worrying me is not the price of today; it is what is happening in the industry,” CEO Claudio Descalzi said in an interview with Bloomberg TV from the COP21 climate change conference in Le Bourget, France. “We cut about $200 billion and I think next year we are going to do the same and that can create in the mid term an imbalance between supply and demand.”
The 65 percent collapse in oil prices since June 2014 has forced the industry to defer exploration to preserve cash and safeguard dividends. Cutbacks of $180 billion were announced in the first nine months of this year, according to consultancy Rystad Energy AS. There may be more to come after OPEC set aside its production target on Dec. 4, potentially lifting the lid on millions of barrels of additional crude.
Descalzi said a “right price” for oil stood at $60 a barrel. That’s about $20 above benchmark Brent crude, which fell below $40 a barrel for the first time in almost seven years on Tuesday.
“I think that the right price is not just the right price for us,” the CEO of the Italian oil producer said. “It’s the right price for the average in the industry and also for the producer country.”
Eni shares fell 2.8 percent as of 3:19 p.m. in Milan trading, bringing this year’s decline to 5.1 percent.