BP Pegs Oil at $55 a Barrel in 2017

Bob Dudley, CEO of BP Plc

Bob Dudley, CEO of BP Plc, told Bloomberg this week that he expects oil to "easily" reach $55 next year because the market "is generally in balance" – remarks that closely follow sentiments he expressed at the World Energy Conference in Istanbul last month.

He also reiterated that BP is re-basing targets with regards to cost of production per barrel: "We're working really hard to balance sources and uses of funds between $50 and $55, and we think we'll get there next year depending on oil prices."

The CEO believes a market balance is a given because "demand is up and industry investment is dropping off; I think we're pretty much on a daily basis in balance right now, within a few hundred thousand barrels."

Bloomberg did not challenge Dudley's outlook, which was not the case in Istanbul when Ian Taylor, chief executive of Vitol, said that although oil prices would rise to the high $50s and low $60s, it will still take until the second half of 2017 for a rebalance to occur; plus, increased production from Russia, Nigeria, Libya, and Iran could keep pockets of the market in surplus.

However, Dudley is hardly alone in his opinion of the market. The International Energy Agency as well as the Organization of the Petroleum Exporting Countries (OPEC) has repeatedly stated that a better balance between supply and demand is imminent – although analysts with a contrary opinion have plenty of numbers and data on hand (not the least of which is sky-high production output by OPEC members) to support their case.

And as much as optimistic industry players may wish he would go away, John Kilduff, founding partner of Again Capital, has cited the undeniably truths of overproduction combined with the withering economies of China, Japan, South Korea, and other Asian countries as the fundamental reason why the market won't reach equilibrium any time soon.

Kilduff most recently sounded the alarm in the wake of West Texas Intermediate suffering a fifth straight day of losses last week: pointing out that production is "higher, not lower...from seemingly every corner of the producing universe," he said,  "WTI oil prices are set to trade back down to the mid-$30s, at least, putting the February low of $26.05 back in play, into year-end.

"2017 is looking like another challenging year for the energy industry."