Price slump leads to further spending cuts in the oil industry

The big oil companies are responding to the sharp fall in oil prices in recent weeks with a new round of spending cuts. 

BP plans to reduce its expenditure this year to below $20 billion, originally it had planned to spend $26 billion, and recently a figure of more than $20 billion had been assumed. Chevron and Statoil have also lowered their expenditure targets by $1 billion and $500 million respectively. 

This week will additionally see Total, Royal Dutch Shell and Exxon Mobil announcing their plans. Consultant firm Wood Mackenzie estimates that projects worth $200 billion have been put on ice or shelved by the oil industry since mid-2014. 

"This is likely to be reflected in a significantly lower increase in oil production in the coming years, thereby helping to tighten the market. It does nothing to change the oversupply in the short term, however. This would require action by the OPEC countries above all, and by the generally small-scale shale oil producers", says Commerzbank.