BP Sees Sub $55/bbl Oil in 2018's "New Oil Price Environment"

Building on recent talk of a new price environment for crude, Brian Gilvary, chief financial officer for BP, on Tuesday said that global oil prices will hold within the $45-$55 range next year amid rising U.S. shale production.

He told media that global oil demand has recovered in the second quarter of 2017 and is expected to grow by 1.4 to 1.5 million barrels per day: "Global demand is looking pretty strong, and prices will firm around the levels seen today."

Still, BP continues to prepare for a new oil price environment "with a continued tight focus on costs, efficiency and discipline in capital spending," according to Bob Dudley, the oil giant's chief executive officer.

Although Dudley didn't mention it, part of that environment in flux includes Venezuela, whose economic conditions have deteriorated to the point where bondholders are unloading the shortest-term securities just three months before a $1.1 billion payment is due for Petroleos de Venezuela, pushing the price down to 73 cents on the dollar.

The quality and quantity of heavy crude from the Bolivian republic, whose oil reserves are among the biggest in the world, have unsurprisingly declined: Reuters reports that supplies to U.S. refiner Phillips 66 has dropped by more than two-thirds this year due to quality problems.

And while Venezuela's downward spiral is in itself a potential contributor to a new price environment, that could be intensified by U.S. president Donald Trump imposing sanctions against the country in reaction to president Nicolas Maduro attempting to seize more political control via a controversial vote that occurred over the weekend; sources say the sanctions could come as early as this week.

Mike Wittner, global head of oil research at SocGen, told Bloomberg that if the U.S. does indeed impose sanctions, it would hit Venezuela "pretty hard" and that, depending on how the sanctions are carried out, it could boost crude prices "by five bucks, 10 bucks," to $60 per barrel.

Although many different experts have their own version of what the new global price environment may look like in the near term, the version offered by Ben van Beurden, chief executive officer for Royal Dutch Shell, is arguably the most explicit: last month he said that he and his colleagues are gearing up for a world of "lower forever" prices due to the rise of alternative powered automobiles, which he believes will cause oil demand to peak by the late 2020s or early 2030s.