The International Energy Agency (IEA) predicts a one-trillion-dollar reduction in global spending on oil this year — up to 2.5 trillion. Revenues from the sale of raw materials will decrease by $ 180 billion amid falling energy prices and rising non-payments.
Energy investments are projected to be lower by 20% this year. Investment plans were adjusted due to a fall in global energy demand during the economic crisis and a sharp reduction in their cost to a historic low. After the OPEC + agreement to reduce oil production since May and the Saudi Arabia’s statement to further reduce production by another million in excess of the volume agreed upon in the agreement, oil prices began to rise. July Brent futures have already exceeded 35 dollars per barrel, the price of WTI in June rose by almost 2.3% - up to 32.5 dollars per barrel.
The largest decline in investments is forecasted in oil and gas companies, where the planned investment this year will be reduced by a third - by 244.1 billion dollars. The agency notes that oil and electricity occupied a significant share in energy spending last year - 50% and 38%, respectively.
“At the beginning of the year, our tracking of planned investments showed that global capital expenditures on energy could grow by 2% this year, which would be the highest growth in global investments in the energy sector since 2014. Pandemic spread of coronavirus has surpassed all expectations, and now this year it is expected the most significant decline in investment in the energy sector - nearly US $ 400 billion compared to the 2019 year "- is listed in the report the IEA.
Experts fear that if investments in oil markets during recovery demand remain at the level of 2020, then by 2025 the market is expected to deficit by almost nine million barrels per day.
The most attractive country for investment now remains China. The country was the first to overcome the epidemic, its economy has already begun to recover. It was previously noted that the demand for oil in China has almost returned to consumption figures before the crisis. However, experts do not predict a full recovery in the near future, as international air traffic is still suspended. However, it was possible to partially compensate for it due to the fact that the Chinese moved from public transport to their own cars - the demand for gasoline in the country increased sharply.
“China remains the largest investment market and a major determinant of global trends. The estimated 12% reduction in electricity costs in 2020 is constrained by the relatively early resumption of industrial activity after strong blocking measures in the first quarter, ”the IEA notes.
In the United States, investment is projected to decrease by more than 25%, in Europe - by 17%. “The coronavirus pandemic has led to a significant drop in demand and uncertain projections about how long it will last. In these conditions, due to excess capacity in many markets, a reduction in new investments becomes a natural and even necessary response of the market,” - the agency concluded.