In addition to preserving cashflow, UBS said companies could be delaying investment decisions in order to take advantage of the deflationary environment to rework projects to reduce costs and improve efficiencies. The bank said that although a slowdown in energy investment will not impact supply in the coming two years, the industry is nonetheless creating “an incipient supply crisis”. Projects approved between 2010-2014, when oil traded at $100 a barrel, will add to the global glut in the near future, but the current investment climate will take its toll on supply beyond 2018. UBS said: “There already looks to be a 4m barrel per day production 'hole' appearing, which we believe will be difficult to offset.” Oil and gas projects expected to come on-stream this decade include a wave of Australian liquified natural gas proposals in 2016 and 2017, as well as Russian and Brazilian oil products.
UBS has warned that the oil industry faces a looming supply crisis, as falling prices cause the pipelines of future projects to dry up; the delay between investment and production in the energy sector means this is "likely to hit the market around 2018". The bank added "there already looks to be a 4m barrel per day production 'hole' appearing, which we believe will be difficult to offset".