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Shell chief: oil to stay at current lows for rest of year

Screen Shot 2015-01-12 at 08.45.23From an article by Andrew Critchlow, Commodities editor, The Telegraph, published 12 Feb 2015 under the headline: 

Shell chief: oil to stay at current lows for rest of year

Oil prices are set to remain at the current six-year lows for the rest of 2015, the boss of the country’s largest oil and gas company will warn tonight.

Ben van Beurden, the chief executive of Royal Dutch Shell, is expected to say that the oil industry should not expect a quick rebound in the price of crude, just the day after another North Sea oil operator reported its first loss in 15 years.

“The market will remain volatile in 2015, if only because for now, Opec (the Organisation of the Petroleum Exporting Countries) shows no sign of wanting to resume its role as swing supplier”, Mr van Beurden is set to say.

“But for the longer term, I see no change to fundamental drivers of oil markets such as rising demand and the need for new supplies.”

Oil companies across the globe have been hit by a more than 50pc drop in crude prices since June, with the cost plummeting from $107 a barrel to under $50 recently, putting them under pressure to make new cost cuts.

Opec, which pumps a third of the world’s crude, shocked markets last November when it decided to allow oil prices to go into freefall after its members agreed to keep their production levels unchanged. Despite concerns over the economic impact of weak oil prices from Venezuela, Nigeria and Iran, the cartel isn’t expected to meet again until June.

Mr van Beurden is expected to issue the warning when he delivers a keynote speech in London on Thursday, where he will also caution over the potential long-term consequences of supply not keeping pace with rising demand if investment continues to be cut back.

Some analysts fear that more than $100bn (£65bn) of oil and gas related projects could be cancelled, or delayed in the short term, due to the 50pc fall in the price of crude over the past six months.

Shell, Britain’s largest company by market value, has already said it will cut its spending by $15bn over the next three years and has shelved a petrochemicals project in Qatar.

Meanwhile, it has emerged that Shell and BP are in a standoff with the government of Abu Dhabi about upfront payments to renew contracts to operate some of the emirate’s biggest oil fields. According to a report in the International Oil Daily yesterday the sheikhdom wants both companies to pay signing bonuses worth around $7bn to secure acces to the huge oil fields.

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