Oil Majors’ $60 Billion Cuts Don’t Go Far Enough as Crude Slides
The $60 billion of oil-industry spending cuts this year aren't likely to be enough to meet sacrosanct dividend commitments as crude languishes near a six-year low.
The world’s biggest producers will need to trim investments by a further $26 billion, according to Jefferies Group LLC. Capital spending will have to fall 10 percent next year, Banco Santander SA says.
Oil companies are bracing for “lower for longer” prices as a global supply glut persists, dragging crude to the lowest close since March 2009 in New York on Tuesday. Royal Dutch Shell Plc, which has reduced spending 20 percent this year, has “more levers to pull” should the market weaken further, according to Chief Executive Officer Ben Van Beurden.
The tightening means international producers such as Shell and Chevron Corp. can break even at a lower crude price -- about $10 lower than before they started cuts last year, according to Jefferies analyst Jason Gammel. (by Rakteem Katakey, Bloomberg)