Oil spend to prove tricky for Opec


It’s "mission accomplished" for Opec in its battle against bulging global inventories of oil, thanks to the production cuts it has had in place for nearly 18 months.

The Organization of the Petroleum Exporting Countries, which supplies a third of the world’s oil, agreed to curb output by 1.8 million barrels per day jointly with 10 other producers including Russia until stocks returned to more normal levels.

The overhang of unwanted crude and oil products has reached Opec’s target, but the group now says it would rather see a pickup in investment, which fell by $1 trillion in the three years of surplus and weak prices that started in June 2014.

Opec, which initially targeted the five-year average level of oil inventories in the world’s richest nations, has said it might consider using other data that is far harder to track, such as oil in floating storage or as commercial inventory in countries that provide no reliable storage information.

Opec has said it could come up with other metrics.

Khalid al-Falih, the energy minister for Opec heavyweight Saudi Arabia, said in early April that output in a number of regions was declining and the only way to avoid a supply shortage in the longer term was for money to start flowing into new upstream projects.

Saudi Aramco Chief Executive Amin Nasser said in March the global oil and gas industry needs to invest more than $20 trillion over the next 25 years to meet growth in demand and compensate for the natural decline in developed fields.

Qatar’s Energy Minister Mohammed al-Sada told Reuters this month that the global oil investment purse of around $400 billion would not be enough.

Investment data from the International Energy Agency confirms Opec is correct about the drop in spending, but it also shows the situation is not quite as dire as Opec believes.

On aggregate, compared with the peak in investment of close to $800 billion in 2014, the data shows that spending did drop by some $1 trillion to 2017.

The IEA data suggests the decline amounted to around $340 billion between 2014 and 2017, but this slowed to $120 billion between 2015 and 2018, suggesting recovery is under way.

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