While Royal Dutch Shell Plc is still planning for a prolonged slump, the industry’s sweeping investment cuts and declining USA output point to higher prices in the future, Chief Executive Officer Ben Van Beurden said Tuesday.
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“All oil and gas companies are now funding their dividend through additional borrowing, but that can not be sustained indefinitely, and unless oil prices rebound meaningfully in the next 6-12 months, the probability of industry-wide dividend adjustment has significantly increased”, Gheit said.
The signals on global demand are mixed and there is no sign that Saudi Arabia, Opec’s biggest producer, will relent on its policy of maintaining production to hold on to market share, he said.
“It will take a few time for prices to recover”, because shale oil has been “more resilient than we thought”, said the Shell boss, who also gave reassurance to Shell’s shareholders that the company would continue to be able to sustain dividends despite the fall in oil prices over the past year.
“We see the first signs of recovery in oil prices”, said Van Beurden, explaining that the recovery was slower than expected due to the ability of U.S. shale producers to refinance even at low prices.
“Shell is pulling out all the stops to safeguard our dividends and buyback program, and to keep our investment program steady for the future”, Mr. van Beurden will say.
Oil prices, which tumbled in August to six-year lows under pressure from strong global output, have been slowly climbing back up.
Oil prices have collapsed over the a year ago in the face of heavy oversupply, with benchmark Brent crude LCOc1 falling to below $50 a barrel from a high above $115 in June 2014.
Saudi Arabia and Iran are at odds over Opec’s strategy. But what if Opec doesn’t get it right and prices remain low for much longer? The Anglo-Dutch producer and five other energy companies have written to the United Nations climate change conference, which takes place in Paris from 30 November to 11 December, calling on governments to introduce carbon pricing systems where they do not yet exist.
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The system of carbon pricing generally taxes polluters, which then pass the costs onto consumers and can lower demand.
