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Oil chiefs: prices to stay low
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February 1, 1999: 11:13 a.m. ET
BP Amoco, Shell leaders planning for continued weak crude prices
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DAVOS, Switzerland (CNNfn) - The heads of two of the world's biggest oil companies agree that crude oil prices will remain weak for some time, and are planning their 1999 budgets around that idea.
In their first joint interview, Mark Moody-Stuart, chairman of Royal Dutch, and Sir John Browne, chief executive of BP Amoco, told CNNfn's John Defterios Monday that they are basing their budgets for 1999 on the basis of a crude price of around $11 per barrel. The price for North Sea Brent is currently around $10.50.
"There may be a bit of a pick-up, but not that much," said Moody-Stuart, "but we're normally wrong about these things."
BP's Browne said "prices will prevail at a weaker level for a couple of years, maybe three," although he added "when we all agree (on oil price predictions) for sure we've got it wrong."
The oil chiefs, in Davos for the annual meeting of the World Economic Forum, focused on the potential for cost cutting in the industry, predicting that capital expenditure deferments would eventually feed through into lower production and higher prices. "There's too much oil in stocks," maintained Browne, "and demand is weak."
OPEC is due to meet in the next few months, and the oil bosses thought it could come up with more cuts in production output. "OPEC ministers will come back to the table, and there will be some adherence to cuts," according to Browne, "but there are tough problems to solve."
As far as industry consolidation is concerned, BP's Browne confirmed the hunt is still on to find the $2 billion in annual cost cuts promised from the merger of BP and Amoco. That deal closed Dec. 31.
Moody-Stuart indicated that a major deal is not a priority for Shell, and said "we will look at mergers, but we've got a lot to do in our own shop, across our own, very large, system." He said the desire to achieve a certain scale was not an issue - as it was in the BP Amoco deal - "because we already have the size."
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BP Amoco
Shell
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