ENI: OPEC MUST ACT NOW
The head of Italian energy company Eni Spa urged OPEC on Wednesday to act to restore stability in oil prices, which he warned could overshoot to $200 per barrel several years down the road because of low investment now.
Claudio Descalzi told Reuters Television he expected prices to stay low for 12-18 months but then start a gradual recovery as U.S. shale oil production began falling.
Oil prices have sunk by almost 60 percent since June to below $50 a barrel due to a large supply glut. The price slide accelerated after the Organization for Petroleum Exporting Countries (OPEC) decided in November not to cut production.
Speaking on the sidelines of the World Economic Forum in Davos, Switzerland, Descalzi said the oil industry will cut capital spending by 10-13 percent this year as a result of the oil price collapse.
However, he said the world should avoid a further massive drop in investment in oil exploration and production as it would create oil shortages in the future, leading to price spikes.
"A lot of our projects are long term to have production in five or six years. And that is a problem. If you are cutting capex (capital expenditure) drastically now - we can have a lack of production in four or five years creating a new increased oil price at $200 maybe," Descalzi said.
"What we need is stability... OPEC is like the central bank for oil which must give stability to the oil prices to be able to invest in a regular way."
The chief executive of French oil major Total echoed Descalzi's warnings earlier on Wednesday.
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