China National Offshore Oil Corporation (CNOOC), the country’s state energy giant, has cut its targeted output for 2016 in the first such move in over a decade.
According to company sources, the decision came amid growing fears about the overall health of the Chinese economy and plunging global oil prices, AFP reported.
China’s economy grew 6.9 percent last year, which was the country’s slowest economic growth pace in a quarter of a century. This came on the back of a continued slump in global oil prices, which has seen those prices fall to their lowest for over 12 years.
CNOOC, which is China’s largest offshore oil and gas producer, had announced on Tuesday that it aimed for an output of 470 million to 485 million barrels of oil equivalent during the current year, a drop from 495 million barrels in 2015. The decision marks the first such decline since 1999.
“CNOOC is one of the first of the world’s [oil] majors to explicitly say it will cut production,” Michael Barron, director of global energy at risk consultants Eurasia Group, told Bloomberg News.
“The other big companies have all slashed spending and it’s implicit that production will fall at some point in the future,” he added.
The announcement came after shares in the company fell 6.13 percent in Hong Kong on Wednesday, where the benchmark Hang Seng Index also fell 3.82 percent.
The energy giant acquired Canada’s Nexen energy company in 2013 for USD 15.1 billion, following which CNOOC officials said Nexen was the focus of the company’s overseas development.
US crude prices continued to fall on Wednesday, dropping below USD 27 a barrel, as the International Energy Agency warned that the oil market could “drown in oversupply.”
The International Monetary Fund said during the current week that the collapse in the oil price was dragging down the global economy.
Royal Dutch Shell also announced on Wednesday that it expects a sharp decline in full-year net profit.