BP Predicts $50 to $65 Range Bound Oil as Data Shows Increasing U.S. Crude Build

The Saudis maintain that demand for oil is as strong as ever. File Image  / Pixabay

Despite recent widespread forecasts of strong demand for crude and sustained higher prices, BP CEO Robert Dudley told delegates to CERAWeek in Houston on Tuesday that spikes notwithstanding, "It feels like we're in a $50 to $65 world for a couple of years."

The notoriously conservative executive, who a while back insisted that oil prices would stay lower for longer, based his prediction on an industry that has learned from the downturn in prices and is now more efficient in managing costs as well as gaining efficiencies from technology and data.

Dudley also contradicted his company's earlier prediction that peak oil demand will be reached sometime in the late 2030s by stating that oil demand will still be over 100 million barrels a day in 2040.

Presumably, Dudley's middle of the road forecast for prices was influenced by an appreciation for the steady build in U.S. shale output, and on that score the Energy Information Administration boosted its U.S. crude output forecasts for 2018 and 2019, stating that production would top 11 million barrels per day in October -- a month ahead of prior estimates.

The EIA also sees worldwide supplies accelerating this year and the next, with estimates for demand growth shrinking.

Supporting Dudley's notion of lukewarm range-bound price expectations was the American Petroleum Institute on Tuesday reporting that crude inventories mounted higher by 5.66 million barrels last week - which, if confirmed later this week by the EIA, would be the largest build since January.

This disclosure resulted in a fairly flat trading session on Tuesday: West Texas Intermediate for April traded at $62.32 per barrel at 4:38 p.m. after settling at $62.60 per barrel, with total volume traded about 10 percent lower than the 100 day average; Brent climbed 25 cents to $65.79 per barrel.

James Williams, president of  WTRG Economics, noted that if the API's size of crude build "gets confirmed by the EIA, we'll probably have a few days of lower crude prices."

Gene McGillian, VP of market research at Tradition Energy, said, "People are waiting to see: will storage volumes point toward a tighter fundamental outlook?

"It does appear as if we need more evidence that the rebalance continues to really ignite a rally again."

But saving the day with assurances that everything is ultimately going to work out fine was Ali al-Naimi, former oil minister for Saudi Arabia, who, when asked if he sees a threat to oil demand from developments such as climate policies and increasing use of electrical vehicles, remarked, "I would like to put everyone at ease, there are no such worries."

He did, however, suggest that his kingdom should focus on developing its mineral deposits to help diversify the economy and called solar energy an important resource along with oil and gas.

It should be noted that Dudley's oil price prediction is virtually the same as the one he delivered last month, which he said would apply until the end of the decade - and which he said he was "very comfortable" with.