Oil industry braces for scenarios of $10 a barrel by spending cuts and suspending its share buyback plan amid low oil prices stuck in the $20s due to coronavirus-related weak oil demand around the world.
Royal Dutch Shell, which has never cut its dividend since the 1940s, announced on Monday that it would cut spending by 20 percent, or about $5 billion, and also suspend its share buyback plan.
French Total and Norway’s Equinor declared similar moves.
Total will cut Organic Capex of more than $3 billion, or more than 20%, reducing 2020 net investments to less than $15 billion, according to the firm's statement.
Norway’s Equinor has suspended its ongoing $5 billion share buyback programme and said it would cut total 2020 spending by around $3 bln, including capital spending reduction to $8.5 billion from previous plans of $10-11 billion, with drilling and completion activities being postponed in the U.S. onshore.
Also, ExxonMobil and Chevron have suggested that they too would be axing their budgets while Goldman Sachs estimates that ExxonMobil needs a price of $ 70 a barrel to cover its costs which had been previously budgeted $30 billion to $33 billion for projects in 2020.
The global investment bank Goldman Sachs also forecasts that Chevron needs a price of $ 50 a barrel to meet its expenditure which had been calculated as $20 billion in 2020.
Furthermore, Saudi Arabia’s state-run oil company Saudi Aramco said it aimed to cut capital spending for 2020 to between $25 billion and $30 billion, compared with $32.8 billion in 2019.
Last week oil prices hit their lowest levels in around 17 years as the coronavirus pandemic continues to weaken global oil demand, and with Saudi Arabia and Russia due to increase their crude oil production from the beginning of April.
Brent crude hit as low as $24.52 per barrel on March 18 to mark its lowest level since May 8, 2003, according to official data. WTI fell as low as $19.46 a barrel on March 19 -- its lowest level since Feb. 7, 2002.
By Busranur Begcecanli
Anadolu Agency
energy@aa.com.tr