Americas News
Oil Slump Could Last Until at Least 2020 Despite Growing Demand: CEOs
Of late, growing demand has always been cited to quash the many arguments why there should be concern over the current global crude glut and its impact on world economies; but oil bosses speaking at the World Petroleum Congress in Istanbul on Thursday estimate that demand won't solve the problem until 2020.
Mark McCollum, president and CEO of Weatherford International Plc, said, "In terms of the magnitude of damage this is by far the worst" industry downturn, and he added it may take until 2020 for demand growth to accelerate enough to bring about market rebalance or for a supply gap to occur that U.S. producers can't fill: "That's when pricing will begin to rise; until then it feels very tenuous."
Bob Dudley, CEO of BP Plc, said, "As companies we have to remain very disciplined about spending and not assume that the price will go up."
Lorenzo Simonelli, CEO of Baker Hughes Inc., added, "Lower for longer is the new normal."
Matt Smith, director of commodity research at ClipperData, reiterated the familiar reason for the grim messages issued at the petroleum summit to CNBC: "We're not necessarily seeing any change in fundamentals, really....all the major producers are level-pegging or increasing their production, in conjunction with rising production coming through from Libya and Nigeria."
He added that "we're not seeing exports dropping either," and the only way the market will rebalance is if reductions on all fronts occur.
Goldman Sachs has a different sort of problem with the current state of affairs: "There's not too much oil in this market, there's too much money in this market," said Jeff Currie, global head of commodities research at Goldman.
When asked about the possibility of a market crash, Currie replied, "I'd like to see some volatility in this market," but he conceded that the probability is "unfortunately" low.
But for those who prefer to live in the present, Thursday was another fairly decent day for crude, with West Texas Intermediate rising 59 cents to $46.08 per barrel and Brent rising 63 cents to $48.37 per barrel.
The uptick was due to news that China imported 8.55 million barrels per day of oil in the first six months of this year, up 13.8 percent on the same period in 2016, and rising consumption in the U.S. and Germany is boosting demand.
But even though the International Energy Agency issued a stronger outlook for global demand, it warned that stocks are still 266 million barrels above the five-year average.
Earlier this week, Goldman Sachs suggested that market woes are so severe that unless the Organization of the Petroleum Exporting Countries deepens its production cuts, oil prices could drop below the $40 mark.
