Sunday, July 16, 2017

A bearish view from Istanbul

The 22nd World Petroleum Congress circus has left Istanbul, Turkey in a distinctly bearish mood, at least that’s the Oilholic’s verdict! 

'Big Oil' boss after boss pointed out to the congress that IOCs were gearing up for a short-term breakeven of $50 per barrel, and working towards a $30 per barrel breakeven by the turn of the decade. Few, if any expect an uptick to a three figure oil price anytime soon. 

The International Energy Agency expects a flood of US shale barrels, so much so that its Executive Director Dr Fatih Birol noted that describing his outfit as being representative of energy consumers was sounding clichéd these days.

Afterall, IEA members US, Canada and United Kingdom, were also energy exporters. At the same time, global oil inventories remain stubbornly above 3 billion barrels, and not anywhere near the 2.7 billion five-year average OPEC is hoping to achieve via its cut. 

Tied in to all of this are two important considerations in light of what's on the horizon. Firstly, OPEC’s production cut in concert with 10 non-OPEC producers only lasts until March 2018 on paper. What happens after that? Surely more oil is coming our way. Secondly, most at the WPC, including the IEA, predicted US production to climb to 10 million barrels per day (bpd) and for some even as high as 10.3 million bpd. 

So what is there to be bullish about? Agreed - as many readers of this blog have pointed out - inventory rebalancing will gather steam towards the fourth quarter of this year, but not to the extent some are predicting. 

For arguments sake, if that is seen as being supportive of the oil price and that sustains oil futures above $55 for a period, more US and non-OPEC oil is bound to come on to the market. Draw your own conclusions where the ‘crude’ world would be heading to thereafter. In short, this blogger finds little evidence that the oil price would escape its current $45-55 per barrel range using Brent as a benchmark. 

Just a couple of things to flag up before yours truly takes your leave. Here is one’s IBT report from the WPC on how spooked the industry is about not being able to attract enough young recruits and qualified female professionals. Additionally, here is the Oilholic’s foray into the emergence of ‘crude’ robots, that could be coming to an oil and gas field near you. That’s all for the moment folks. Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2017. Photo: An oil tanker in the Bosphorus, Istanbul, Turkey © Gaurav Sharma, July 2017.

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