Global spending in exploration and production over the next two years is expected to be about half what it was between 2012 and 2014, OPEC said in a monthly report.
In February, when crude oil prices were hovering around $30 per barrel, a review from the U.S. Energy Information Administration found 2015 investments in the energy industry declined in the United States by more than 30 percent last year.
Even though crude oil prices have recovered about $15 per barrel since then, companies handing in their first quarter reports took notice of the resultant decline in industry spending. Oil field services companies Baker Hughes and Halliburton each reported heavy losses. Paal Kibsgaard, the CEO of industry leader Schlumberger, said the market was unpredictable, while Bernard Duroc-Danner, the head of rival Weatherford International, said the downturn was "violent."
The Organization of Petroleum Exporting Countries said in its latest monthly market report it estimated about $290 billion was cut from spending plans across the globe in the last year.
"Between 2016 and 2018, the industry is expected to invest around $40 billion per year in exploration and appraisal, less than half its investments during 2012 to 2014," the report read.
If that situation doesn't improve, experts with analysis group Wood Mackenzie said the global oil market may face long-term shortages. Weak exploration trends suggest the market could be faced with a 4.5 million barrel per day shortfall by 2035.
Following two years of steady growth, OPEC said the decline in the United States would be around 430,000 bpd. Overall, the monthly report finds production from suppliers outside the 13-member group will decline heavily, with growth only expected in a few countries like Canada and Russia.
"It is widely recognized that an adequate return on investment is needed to maintain production levels, as well as to allow for the growth necessary to meet future requirements in a timely fashion," OPEC said.
By Daniel J. Graeber