Americas News
BP's Optimism for a Glut-Free 2018 Dashed by Colleagues Who Warn of Another U.S. Output Surge
As the new year draws nearer, experts are weighing in more heavily on what 2018 will mean for the crude market, and one of the more optimistic voices was heard at the Oil & Money conference in London on Wednesday when Bob Dudley, CEO of BP, said the market is rapidly tightening.
Dudley, who remarked during the peak of the oil crash that traders would start filling swimming pools with crude, went on to explain, "the swimming pools are draining; stock levels are just heading down, for both crude and products, so it does seem we're heading towards the targets that were set by [the Organization of the Petroleum Exporting Countries)."
Dudley acknowledged that geopolitical risks are rising and on everyone's radar: "We're starting to see that again effective in the price...but if you look just at the balance of supply and demand, I think [the oil price] is about in the right place" at current Brent prices near $60 per barrel.
Ian Taylor, CEO of Vitol Group, was more cautious in his assessment of where the market is headed: speaking at the same conference, he conceded that many industry players think prices will go higher, but "I think there's a chance oil could fall closer to $40 than $50, because I think there's still one more big surge coming from U.S., which will knock prices down," and he forecast a median of $45 per barrel for 2018.
After the conference, Taylor was asked to factor in the notion of Kurdish oil supply being removed from the market as a result of the conflict with Iraq; while stressing that the impact would last only a few months, he said the lost crude would result in the market "probably seeing that magic six" for the short term, a reference to $60 per barrel.
The notion of the U.S. disrupting what would otherwise be a buoyant 2018 is keenly appreciated by France's Total: Patrick Pouyanne, chairman and chief executive of the oil giant, who pointed out during the Oil & Money event that "Our U.S. colleagues are hedging like mad at $56 a barrel, so we will see another wave of investment in U.S. shale, no doubt about it."
Jamaal Dardar, research associate for Tudor, Pickering, Holt & Co., added, "There is definitely going to be a pretty large surge in production next year."
While the Iraq/Kurd conflict is earning considerable media focus, analysts agree that the market impact will be short lived: Jason Gammel, equity research analyst at Jeffries, doesn't even think the removal of 600,000 barrels per day of Kurdish crude will propel prices to a modest $60 per barrel.
