Global oil markets could see an increased risk of another major jolt if prices continue to remain at current levels, Tom Albanese, the chief executive of Vedanta Resources told CNBC.
Recent reports show that discoveries of new oil reserves have dropped to their lowest level for more than 60 years. The chief of one of the world’s largest diversified natural resources companies implied that this could potentially cause supply shortages.
“People are saying there’s no such thing as $100 oil coming again but the longer the prices stay low for this period of time you could see increased risk of a price shock coming in the future,” Albanese said.
However, he added that with Brent crude edging back over $50 a barrel then producers will start coming back online and adding to global supply.
“We’re all suffering these lower oil prices. But certainly it’s a better price environment than we were facing six months ago,” he said.
“We are at the cusp of a pricing environment that we can just about begin investing again. So I think that our situation is probably not that atypical, that at somewhere between $45 and $50 a barrel you may start seeing people coming back in spending a little more capital.”
Oil prices are up around 23 percent year-to-date after a dramatic plunge since the middle of 2014. OPEC’s reluctance to cut output has been seen as a key reason behind the fall, as well as weak global demand, a strong dollar and booming U.S. oil production.
Volumes for conventional oil and gas discoveries made outside of North America have seen a multi-year decline, according to research by IHS Markit this summer. It said in May that “just 12 billion barrels of oil equivalent estimated recoverable resources were discovered in 2015.” A record low not seen since 1952.
Vedanta’s main interests lie in copper, zinc, silver, aluminium, oil and gas and iron ore. Its operations span India, Zambia, Namibia, South Africa, Liberia, Ireland and Australia and it is listed on the London Stock Exchange.
Albanese was previously CEO of Rio Tinto, from which he resigned in January 2013 after the Anglo-Australian mining giant clocked up around $14 billion in write-downs.
Major oil firms have been busy cutting costs since the downturn in prices and Albanese told CNBC that he expected that to conjecture in the near term. Tempering his earlier comments on a possible price shock, he added that oil traders “could be in somewhat of a volatile sideways market for some time.”