Oil producing giants Kuwait and Abu Dhabi plan to increase output after discovering huge new fields despite the volatile price of crude.
Abu Dhabi is planning a $25 billion project to build offshore rigs and pipelines to access new fields in the Gulf over the next five years.
Both Gulf States are racing to increase oil production to boost market share.
Abu Dhabi wants to pump out 3.5 million barrels a day by 2018. Current production is around 2.8 million barrels a day.
The offshore plan is to drill 160 new wells
Kuwait has also found four new fields with ‘huge commercial volumes’ of light and heavy grade oil, according to nation’s government.
Kuwait is looking for a 33% boost in production by 2020.
“Production will start soon after we have spent two years prospecting,” said a spokesman.
Overall, Kuwait wants to lift oil output from 3 million to 4 million barrels a day.
Neither government seems too concerned about plunging oil prices.
The cost of a barrel of crude has dropped by around 50% in a year to $50 a barrel.
Despite the economic implications to oil producing nations, none has yet flinched at turning down production, so they are contributing to a growing oil lake that is expanding as demand falls worldwide.
The inference is global oil prices are unlikely to stabilise as supply exceeds demand – and until supply rebalances to meet customer expectations, the price is likely to keep dropping.
This is good news for business in non-oil producing countries, which benefit from lower energy costs and can decide to charge less for their goods or make more profit.
For oil producers, many Middle East nations have huge cash reserves that they feel will pay their way through this lean price period.
Iron ore plummets
Countries feeling the squeeze include Russia, which is one of the world’s leading oil nations and does not have the cash reserves to withstand a price siege.
Oil is not the only commodity with prices under pressure.
Investors in Australia, one of the world’s leading iron ore producers, have seen £38 billion wiped off the value of mining stocks in little more than a year.
Anyone holding stocks has taken a massive 92% hit and is likely to lose more as the market shows no sign of bottoming out.
Following oil, iron ore prices slumped from $130 a ton in January 2014 to $50 a tonne now.