EMEA News
Statoil Drops Long Term Oil Forecast to $75 Per Barrel
The market slump, which is being fueled by persistent reports of U.S. inventory builds and other factors, is causing an increasing number of experts to downgrade their market forecasts, and Statoil is the latest to do so with a prediction that Brent crude will reach $75 a barrel in 2020.
While this figure is considerably bigger than those suggested by other analysts, it's a disappointment for the state-controlled Norwegian firm, which previously forecast $83 and $80 oil in 2030, compared with $100 previously.
Statoil's outlook was delivered in its fourth quarter report released this week, which also revealed that the company suffered a net operating loss of $1.9 billion versus a forecast $2.1 billion profit.
Concurrent to the Statoil news was an announcement by BP that it too missed Q4 earnings forecasts and believes oil prices will remain above $50 per barrel this year – which is a far cry from the $60s that many analysts and some Organization of the Petroleum Exporting Countries (OPEC) members predicted would be the outcome of the cartel's production cutback agreement, now in its second month of implementation.
But while the long and short term forecasts may be disappointing to some observers, the current state of the market is favourable to Qatar, which reportedly may not need to sell $10 billion of bonds in 2017 as earlier predicted by Bank of America Merrill Lynch.
Ali Al Emadi, Qatar's finance minister, told Doha media, "We might not issue; given where we see the oil prices today, I think we are somewhere close to break-even."
The global slump in prices and its $200 billion spending plan for the FIFA World Cup in 2022 caused Qatar last year to post its first budget deficit in 15 years, and it based its 2017 budget on a conservative crude price of $45.
But Brent's current performance at the $55 mark has enabled Qatar to meet its various budget commitments (including those related to FIFA), as has the merger of government ministries and project cancellations; now, the country is seeking to expand opportunities for private businesses and investing overseas.
Al Emadi said, "Part of the sovereign wealth fund strategy is to have very much a diversified portfolio; some of the choices we've made over the past three or four years - in terms of geography and currency - have paid off for us very well."
Even though the second week of February is only halfway over, there's been no end of brutal market predictions, with John Kilduff, founding partner of Again Capital, stating that crude could trade as low as $42 over the next couple of weeks, and Philip Verleger, president at PKVerleger, musing that if the OPEC agreement stumbles and U.S. president Donald Trump's taxation policies falter, oil could drop to $35.
