OPEC head warns investment cuts threaten oil supply

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ROME: The head of the OPEC oil organization warned Tuesday that sharp cutbacks in investment by petroleum firms poses a threat for future supplies.
Mohammed Barkindo said that after plunging by 26 percent last year, a further 22 percent drop in investment was expected this year.
Oil firms have slashed their investment budgets as they seek to adapt to the price of crude falling from over $100 per barrel in 2014 to under $30 at the beginning of this year, before recovering to around $45.
On Tuesday, Brazil’s state oil company Petrobras announced it will cut investments by 25 percent over the next five years.
Barkindo called the cutbacks a “major concern for industries which need regular investments” and “which threaten our future”.
Too severe a cutback in investment could leave the industry unable to meet rising demand in future years.
The OPEC secretary general said “to revise this cut in investments, the process of rebalancing the market needs to be fast tracked”.
Oil prices haven’t rebounded as there has been too much crude on the market, with OPEC states primarily responsible as they have kept output high, seeking to maintain market share.
Previously, OPEC members would cut back output to balance supply and demand, thus ensuring prices stay at levels sufficiently high for profits and investments.
The 14 OPEC states and Russia are due to meet next week, with Venezuelan President Nicholas Maduro saying Sunday a deal on limiting output was close.
Meanwhile, oil prices recovered on Tuesday from six-week lows, with US crude rising as much as 1 percent, as the market weighed up OPEC comments that a possible production freeze agreement could last longer than expected.
US gasoline futures tumbled 4 percent after Colonial Pipeline Co. said it expects to restart its main 1.3 million barrel per day gasoline line on Wednesday after being shut for more than a week to fix the biggest leak in nearly two decades.
Brent crude futures were down 10 cents at $45.85 per barrel by 12:14 p.m. EDT (1614 GMT). Earlier in the session, they fell to $45.09, the lowest since Aug. 11.
US West Texas Intermediate crude futures rose 45 cents, or 1 percent, to $43.75. WTI’s session bottom of $42.55 was also the lowest in nearly six weeks.
The pending expiry after Tuesday’s settlement of WTI’s October delivery contract, the front-month for the US crude benchmark, had also weighed in New York’s morning trade.
Worries that US oil stockpiles may have risen last week, however, limited gains in crude futures.
US crude stockpiles likely rose 2.3 million barrels last week, analysts forecast in a Reuters poll. The American Petroleum Institute (API), a trade group, will release its weekly crude inventory report at 4:30 p.m. EDT (2030 GMT), before official stockpiles data on Wednesday from the US Energy Information Administration (EIA).

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