A Matter of Perspective
Our perspectives, and consequently, our interpretation of events, can vary due to various factors. A recent article in “Rigzone” points out how they are affected by time and economic interest. The World Petroleum Council sponsors the World Petroleum Congress every three years. The gathering includes all the stakeholders in energy markets, regardless of political or economic interest.
At the 2014 session, optimism reigned among producers and suppliers. The Islamic State had seized parts of Northern Iraq and appeared unstoppable. There was much speculation as to when oil would reach $125 per barrel.
Now, the Iraqi army has retaken Mosul and ISIS is on the run. Oil has fallen at times below $30 and producers appear grateful for $45 a barrel when they can get it. Oil executives are more concerned with restoring balance sheets and surviving than with exploiting opportunities. Even with production cuts by OPEC and its allies in effect, international banks such as Goldman Sachs and BNP Paribas are cutting their price forecasts for the years ahead.
Mark McCollum, the head of Weatherford International, feels that conditions in the oil patch will not improve for another three years. The attitude that prices will stay ‘lower for longer’ was echoed by Baker Hughes CEO, Lorenzo Simonelli, who sees the current price situation as the ‘new normal’.
BP’s CEO, Bob Dudley, opined that low prices will be with us longer than originally expected, but eventually prices will rise as global demand for oil surpasses supply and erodes inventories. Saudi Aramco CEO, Amin Nasser, sees this being accelerated due to a $1 trillion drop in investments in exploration and production projects.
Understandably, Dinesh Kumar Sarraf, chairman of India’s State Run Oil & Natural Gas Corp., thinks that oil producers need to learn to live with ‘lower forever’. However, he sees this as good news as his country imports more than 80% of its oil. Over the last two years India has spent about half what it did for oil in the previous two years. His boss, Oil Minister Dharmendra Pradhan, concurred, “The new normal has emerged. This price will stay. This is a reasonable price for everyone.”
It is all a matter of perspective.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=151003&utm_source=DailyNewsletter&utm_medium=email&utm_term=2017-07-14&utm_content=read&utm_campaign=feature_3
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