Plunging oil prices are putting pressure on crude-producing countries and upending plans by energy companies.
On Monday, crude tumbled to fresh lows in New York, the worst since July 2009. Oil futures are down 36 percent this year.
Oil prices have plunged for months as global supply growth has outpaced expectations while demand has been tepid, according to the Wall Street Journal.
Already, companies have been forced to make changes.
ConocoPhillips said it now expects its capital spending to fall 20 percent from a year ago to US$13.5 billion next year.
The Houston-based oil giant plans to spend less on major projects that are nearly complete as well as defer spending on emerging shale plays in North America.
Norway’s Statoil A.S. will suspend operations at three oil-drilling rigs longer than previously planned because of overcapacity.
Meanwhile, Schlumberger expects to post a pretax write-down of US$800 million for the fourth quarter, related to the oil-services giant’s plan to reduce the size of its WesternGeco marine seismic fleet.
Continental Resources Inc., a major oil producer in North Dakota’s Bakken Shale, will spend US$4.6 billion in 2015, US$600 million less than planned, due to lower oil prices.
Iain Pyle, an analyst with Bernstein Research, said oil companies will have to reexamine some of their big investments.
If oil prices don’t rebound soon, “what we’re going to see is projects getting canceled”, he said.
While companies in the oil industry warn of major changes to their production and expenditure plans, those leading many of the world’s top economies have said the drop could be a shot in the arm for their economic forecasts.
The positive outlook from top policymakers in the United States, Europe, Japan and elsewhere comes even as history has shown that sharp drops in oil prices tend to be associated with recessions as energy demand collapses.
Few outside the energy sector have been hurt by this year’s oil rout but the ripples likely have only begun to be felt, the report said.
Oil producing-countries are already hurting, especially those that rely heavily on petroleum revenue such as Iraq, Algeria and Nigeria.
It is also a difficult development for countries such as Russia, Venezuela and Iran, which are already facing deep economic problems.
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