Crude At $20-$100 All in the "Normal Range" Moving Forward: BP

by Ship & Bunker News Team
Tuesday September 20, 2016

In what amounts to a jab at the analytical community, a BP executive says it's inherently impossible to accurately predict oil prices and that he wouldn't be surprised if oil hits anywhere between $20 and $100 in the long term.

Paul Appleby, head of energy economics at BP, discussed a variety of oil-related topics with the Offshore Energy Today website; when asked if prices of around $50 a barrel are a new, long-term reality, he replied, "It's certainly far from simple; that's a good description.

"The one thing we know for sure about the price of oil is that we can't predict the price of oil."

Appleby went on to remark that demand is growing strongly, "but we still have a very large overhang of stocks, and that's what's reflected in the current prices ... we expect the market to work its way through that excess inventory; it'll take time, but eventually, there should be some relief with spot prices, however, I wouldn't put a number or date on that."

Although reluctant to be specific about the future, the energy chief projects that demand growth will average about 0.9 percent annually over the next 20 years: "We don't think that means a substantial growth in oil prices, certainly nothing beyond the historical range of prices that we've seen, because we think there's still plenty resources for oil and other liquids to meet the world's growing need, and they're available at prices well below $100 that we saw."

But when pushed by Offshore Energy to outline price scenarios over the long term, Appleby said, "I wouldn't be surprised to see oil at $100 or $20 at any particular point, because when you look over the past 20 years, we've had years with oil below $20, and years with the oil above $100 - so those prices are within the normal range."

However, "I wouldn't regard either of those as a central scenario."

As for the relevancy to the market of the Organization of the Petroleum Exporting Countries' freeze talks later this month in Algeria, Appleby delivered another jab by remarking, "Both Saudi Arabia and Russia have been producing at record levels recently, so I'm not sure how much you can read into any agreement to stabilize production.

"How much more could their production grow anyway in the absence of that agreement?"

While Appleby has suggested the parameters of upcoming oil prices, experts such as Jim Ritterbusch, president of Ritterbusch & Associates, recently offered specific near-term scenarios; in response to the market's dismal performance last week he said, "Crude futures are taking on an increasingly bearish appearance," and with regards to West Texas Intermediary, "this can potentially expedite our expected trip south to the $39 area."