Global giant says deflated market, improved efficiency could stimulate Chinese economy

Oil and gas giant BP Plc expects crude oil prices to keep falling in the short term as global supplies continue to outpace demand this year.

"A low price environment is probably what we should plan in the short term if we are prudent, because currently there is an excess amount of supply," said Dev Sanyal, BP's executive vice-president for strategy and regions.

He said that the current prices reflect the supply situation, and coupled with huge inventories may take some time to clear out.

In August, global oil prices fell below $50 a barrel, the lowest in six years amid expectations of a further global glut and slowing economic growth.

Sanyal, also a member of the Group Executive Committee of BP, said there are excessive oil supplies in the market as production in the Organization of Petroleum Exporting Countries has risen substantially in the past few years, while prices have declined by half from a year ago.

During the first six months of the year, amid bleak industry conditions, most of the oil majors reported huge drops in profit, followed by a slew of responsive actions, including divestment and simplification programs, to cut costs and improve efficiency.

Analysts attributed the decline to the sharp drop of oil prices which have squeezed margins for many oil producers and traders.

However, the low oil price is not all that bad news, Sanyal said.

For big oil importers like China, it could serve as a stimulus to the economy, he said.

China's crude imports in July rose 29 percent year-on-year to 30.7 million metic tons, according to data from the General Administration of Customs.