Shell's CEO says volatility will last well into 2023: File Image/Pixabay
With the U.S. economy on Thursday declared to now be in a technical recession, it was unsurprising that demand concerns would cause a drop in oil prices – and drop they did, but only for the American benchmark.
West Texas Intermediate fell 84 cents to settle at $96.42 per barrel and Brent gained 52 cents to settle at $107.14 per barrel after it was reported that the U.S. economy shrank for a second consecutive quarter; however, the WTI price decline was mitigated some what by reports that crude stockpiles dropped by the most since the end of May, by 4.5 million barrels.
As in previous sessions, the concern of demand destruction seems to be equally matched by concerns over tight supply, and the latter sentiment on Thursday was expressed by Phil Flynn, senior market analyst at Price Futures Group Inc.; he said, "When we look at recessionary numbers, if it is a slowdown at this point, it's a minor slowdown; if you look at demand and supply numbers for oil, we're well below average on supply and demand is holding up better than anticipated."
Ben van Beurden, CEO, Shell
There is more upside than downside when it comes to the oil price
Also, Ben van Beurden, CEO of Shell, told Bloomberg television that “There is more upside than downside when it comes to the oil price: demand hasn’t fully recovered yet and supply is definitely tight.”
He added that supply will be constrained and prices will remain volatile “not only for the remainder of this year but well into next year.”
Indeed, the reduction in flows of oil to Europe from Russia has exacerbated market tightness and caused the spread between WTI and Brent to widen this week.
In other oil related news on Thursday, not everyone is spooked by high oil prices: Cenovus Energy Inc. said inflation has been manageable for the company so far, and that it may spend hundreds of millions of dollars more this year than originally planned on an acquisition in Alberta and also to restart a project off the coast of Newfoundland.
The Calgary-based producer had net earnings of $2.4 billion in the second quarter compared with $224 million a year earlier.
Stewart Glickman, energy analyst at CFRA, told media that “This quarter is going to be a blowout” for Exxon Mobil, Chevron, and other energy giants, and he added that “They have, I would say, a couple of tailwinds at their back: the first for sure is energy prices.
“But it’s both oil and natural gas: crude oil, U.S. WTI, was averaging close to $110 in the quarter: that’s up 65 percent year-over-year. … natural gas, that was about $7.50 per million BTU [and] it was under $3 a year ago.”