OREANDA-NEWS. ExxonMobil chief executive Rex Tillerson said oil prices will remain low in coming years and recent upswings in the market may be false signals.

"People need to settle in," Tillerson said at the IHS CERAWeek energy conference in Houston. "This [low oil price] is with us for a while."

Oil has plunged 50pc since June as supplies, particularly from a booming US shale industry, outpaced demand. Producer group Opec's decision in November to keep output ceilings steady despite the weakness, exacerbated the fall. Tillerson, whose company has cut spending plans to withstand the downturn amid falling cash flows, defended Opec's move as it is "allowing the market to determine the price."

"They [Opec] are not trying to threaten other suppliers," he said.

North American onshore output saw a rapid increase over the past few years as producers stepped up drilling and expanded operations by borrowing on the back of a strong market. That surge in supplies came just as the world's second-largest oil consumer, China, was slowing down, creating a market imbalance.

"The freight train of North America just kept delivering," Tillerson said.

Yet the fall in the market is demonstrating the resilience of the US shale industry. While US rig count has plunged by nearly half, the jury is still out on whether that will result in a significant drop in oil output or if the industry will replicate developments in the US gas sector where production has risen despite a plunge in rig use, aided by technological innovations.

The fall in prices is also leading to a decline in costs of services such as rigs, crews and drilling chemicals. Tillerson's comments were echoed by the chief executives of Total and Occidental, who all said that costs were previously climbing so high there was a risk that that quality of work would suffer as service providers were stretched thin. The correction in the market will allow for greater efficiency and the deployment of better technology to make production more cost effective in the longer term, they said.

But chief executives across the spectrum, from oil majors to independents to national oil companies, warned a risks of a sharply tighter market in coming years if there is an industry-wide panic and investments in future projects are all put on hold.

The chief executive of Kufpec, Kuwait Petroleum's overseas investment company, described the current market as a regular cyclical downturn and not an "oil armageddon." Shaikh Nawaf al-Sabah said his company is still looking for assets and is sticking with its target to reach 200,000 b/d by 2020.

Similarly Muhammad Al-Saggaf, Saudi Aramco's head of shared operations and services, said the company is sticking with its research budget to make sure work on innovations and technology improvements continue.

Total's chief executive Patrick Pouyanne said that deferring investments runs the risk of tightening the market by 2017 or so when demand starts to pick up and existing spare capacity struggles to meet that demand.

ExxonMobil's Tillerson said, despite the cut in capex, the company has "plenty of things to keep us busy."