U.S. producers doubt oil prices will reach $70 until the next decade. File Image / Pixabay
Russia, which has been vocal in determining if the Organization of the Petroleum Exporting Countries (OPEC) should extend its cutback initiatives (president Vladimir Putin seems open to the idea, while the energy ministry says it's premature to decide) now says the deal should be scrapped if crude hits $60 per barrel.
That was the message from Vagit Alekperov, chief executive officer at Lukoil, Russia's second largest oil company; he told Bloomberg television, "If the market situation is negative...then Mr. Putin is correct [and] it will be necessary to extend the deal, maybe for three months, maybe to the end of the year.
"But if the goal is reached at the price is $60, then I think we should smoothly exit the agreement; we should not allow a market deficit."
Andrew Slaughter, Deloitte's Center for Energy Solutions
The new reality seems to have set in
Alekperov did not explain why the cutoff should be $60, but presumably he thinks it's the tipping point that would prompt U.S. shale producers to increase their output and ruin any gains made by OPEC and participating countries.
But while higher prices are also a concern for many OPEC members, nearly two-thirds of U.S. oil executives think crude will remain below $60 throughout next year and won't hit $70 until at least the next decade.
A survey published Wednesday by Deloitte Services and based on a poll of 250 executives at companies that produce, transport, and refine oil and natural gas, also showed that half of those polled expect capital spending to drop next year; moreover, nearly 60 percent expect a decline in the number of drilling rigs active across America.
Andrew Slaughter, head of Deloitte's Center for Energy Solutions, said, "The bottom line is that companies should focus on cost discipline and operational efficiency.
"The new reality seems to have set in; waiting for a significant price recovery may be a long haul."
Conflicting media reports make it almost impossible to determine if the global glut is shrinking at a rate that will cause prices to rise significantly in the near future: on one hand, OPEC recently pointed to dramatic declines in tanker crude storage as proof the market is rebalancing; but on the other, Saudi Arabia's Aramco committed to making the deepest cuts yet to encourage market stability.