Royal Dutch Shell and BP warned investors not to expect a strong rebound in oil prices next year as they set out plans for further cuts in spending to contain rising debts.
The UK-listed oil majors both said they were planning for prices per barrel in the low $50s in 2017 – only a little above current levels – in a sign of the industry adapting to “lower for longer” market conditions.
Prices have stabilised recently after the sharp falls from $100 a barrel two the sharp falls from $100 a barrel two years ago but Shell and BP made clear that they were not counting on a return to previous peaks. “We see some firming in prices next year but nothing significantly north of what we see now,” said Brian Gilvary, BP’s chief financial officer, after announcing a 48% drop in BP’s third-quarter earnings.
Shell fared better during the three months to September 30, reporting an 18% increase in profits which reflected heavy cost cuts after the reflected heavy cost cuts after the completed in February.
Mr Gilvary said that BP’s capital investment would decline to about $16bn this year, down from an earlier forecast of $17bn-$19bn, and would remain broadly stable at $15bn-$17bn in 2017.
Shell said that its capital expenditure would be about $29bn in 2016 – almost 40 per cent less than the combined investment of Shell and BG Group two years ago.