Oil giant Anglo American is warning of “slow death” of the fossil fuel industry as global demand for oil continues to fall.
The company said Tuesday it will cut more than a million jobs and lay off another 2 million people as it shifts focus from drilling rigs to refining, shipping and transportation.
Oil prices fell more than 7% in premarket trading on Monday to settle at a record low of $26.40 a barrel, and have since recovered.
But analysts said the outlook for oil production remains bleak.
“I don’t think you’re going to see significant change in production from the current level,” said Doug Porter, a senior energy strategist at RBC Capital Markets.
“We’re seeing a lot of the oilfield services sector coming out of the black.
That’s a big part of the problem.”
A slowdown in oil demand is a problem for many of the world’s most important companies.
ExxonMobil has said it expects to spend $100 billion this year on its global operations.
The oil and gas giant said Tuesday that the U.S. economy will expand by 1.1% this year, its worst showing since 2009.
That would be the second straight year that the economy shrank.
BP has also said it will reduce its workforce by 2 million.
Boeing said it would lay off about 5 million workers in the U, Canada, Europe and Asia.
ExxonMobil said the U.-China agreement would provide a buffer to the downturn in oil prices, but warned that it could cause the industry to experience more uncertainty and slower growth.
Some analysts have suggested that the deal would also help the U: If it could be renegotiated to protect the U-China pact, it would give Beijing more leverage to control prices and other economic and financial aspects of the deal, said David Smith, chief executive of energy advisory firm EIA.
At the same time, some companies said the deal is unlikely to spur the kind of economic growth that could keep global oil demand stable.
Companies such as Chevron and Royal Dutch Shell have said they’re more concerned about maintaining their business in the face of the slowdown in demand.
In an interview with Bloomberg TV, BP chief executive Bob Dudley said that he has “seen no evidence” that the global downturn will hurt the company.
Dudley said that if the U’s trade barriers were removed, BP would need to do more to diversify its oil supply to make up for the losses.
Earlier this month, BP said it plans to increase spending by $4 billion on new rigs, refineries and pipelines as it tries to boost production.
For now, the company is focused on refineries, refiners and pipeline projects, including an oil-to-gas pipeline linking the Gulf of Mexico to the U of C’s main campus.
Piper Jaffray analyst Brian E. Smith said BP is “well ahead of schedule” in its refineries project and is in “very good shape” with the pipeline.
And if the pipeline goes forward, he said, the firm is expecting BP to reduce costs for the project by $20 billion.
As for the refinery project, BP is still looking to build a new pipeline to link it to its main operations at the refinery to the refinery in Louisiana.
Still, Smith said that the refinery could see a boost in output as the company adds more processing capacity and expands the number of pipeline facilities that can carry oil.
It’s a “good project,” Smith said.
“If you could get it done faster, it’s a good deal.”