Economy to delay new oil projects

WASHINGTON (Reuters) – A weak global economy and the policy shift in the United States toward renewable energy will lead companies to cancel oil projects, a trend particularly worrisome to Saudi Arabia, analysts and economists told an energy conference on Wednesday.

With oil falling from the peak of $147 a barrel last July to around $50 now, oil companies will have to slash spending and some could face bankruptcy until prices rebound.

“We’re really seeing the shift from the 20th century to the 21st century as being the death of oil and the end of the oil era,” said oil analyst Paul Sankey of Deutsche Bank at the annual Energy Information Administration (EIA) conference.

An underinvestment in oil projects while prices are low will inevitably create a supply crunch once demand returns, sending prices back to record highs, he said.

Soaring prices would only strengthen the global shift away from oil, Sankey said, causing as much headache for Saudi Arabia as its top customer the United States.

Reuters