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Oil Sector Expected To Reduce Investment In New Projects

Despite the overall benefits for the global economy, the prolonged period of low oil prices is likely to reduce investment in new oil projects, raising the potential for economic and political instability in some oil exporting countries.

Since OPEC declined to reduce its production rates in late November 2014, both the global oil giants and smaller players in the oil sector moved to reduce their investments and capital spending in order to sustain the potential damage to their everyday operations.

So far, energy giants such as Chevron (CVX), BP (BP), Shell (RDS.A) (RDS.B), Total (TOT) and ConocoPhillips (COP) announced massive capital spending cuts, which will in effect result in most large R&D projects being put on hold until the oil price rebound. Shell is planning to postpone 40 projects in the next two years, while ConocoPhillips is reducing its capital spending by 33%.

This will particularly affect expensive and very… Read More …