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Saudi oil minister Al Naimi has previously said that $70 to $75 a barrel is a reasonable oil price.

And despite a global shift towards alternative fuel, oil is expected to maintain its status as the predominant source of energy as the global economy recovers, fuelling the economies of both Asian nations.

In the near term, however, oil markets are flagging. In a bid to stimulate demand, OPEC has embarked on a record 4.2 million bpd of output cuts, announced last year. Nobuo Tanaka, IEA’s executive director, has predicted that OPEC’s spare oil-production capacity will fall below 3.5 million barrels a day in 2013.

Top oil producer Saudi Arabia has already cut output by nearly two million bpd to less than eight million bpd over the past six months as a part of its OPEC commitment.

Abu Dhabi National Oil Company (ADNOC), Abu Dhabi’s state oil company, announced cutbacks of between 15 and 17 percent in shipments from its oil fields for April, following earlier cuts in the previous month.

At the same time, governments in the region have been putting on hold ventures to find new fields, expand existing wells and build refineries. It emerged last week that global oil giants Chevron and BP were pulling out their top executives from Kuwait after failing to reach an agreement to boost production from the world’s fourth-biggest crude oil reserves.

The move comes after the revelation earlier this month that Saudi was delaying two projects aimed at raising its production capacity beyond 12.5 million barrels daily.

Following the plunge in oil prices last year, state oil company Saudi Aramco stopped work with Italian oilfield services company Saipem to develop its Manifa oilfield, an offshore field originally scheduled to produce 900,000 bpd by 2011.

Saipem said this month that it expected the $1.94bn contract to be renegotiated to reflect falling construction costs but added the project is likely to be delayed by 12 to 18 months.

“We have seen many countries delaying production projects and exploration projects due to the lower oil price,” Zimmermann notes. “They have had to decide what to do with the limited amount of cash they get at lower oil prices; whether to invest it in dividends or capital expenditure.”

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