BP's Hayward: Recovery won't be quick

BP CEO Tony Hayward told analysts in London today that low oil prices and low demand will likely stretch through 2009 and possibly into next year.
He said during BP’s annual strategy presentation to analysts that in the short term, prices will be determined by a balance of production cuts by the Organization of the Petroleum Exporting Countries — about 4.2 million barrels a day since September — as well as the state of the global economy and oil demand, which is expected to be down in 2009 for the second consecutive year.
“We therefore do not expect a quick recovery, and it would be wise to prepare for continued volatility,” Hayward said.
In that vein, BP has trimmed its production forecast through 2012 to 4.1 million barrels of oil equivalent per day from 4.3 million barrels. The company also reduced its 2009 spending plans by $1 billion to $21 billion.
That’s still close to 2008 spending levels, but reflects BP’s intention to capture savings on costs. Hayward noted today that costs doubled in recent years as crude rose to unprecedented levels. Crude swiftly fell to 2004 levels late last year, but costs are falling much more slowly, leaving BP and its competitors to push for savings.
“We’re seeing early signs of it happening already,” Hayward said. “The market is beginning to soften and, over the last few months, we have already seen sharp drops in the price of steel and petrochemicals.”
He said BP aims to be proactive and use its “significant global purchasing power” to negotiate better contracts on projects.