[LONDON] Oil prices that have tumbled 50 per cent in a year have further to fall and won't recover any time soon as supply swamps demand, according to BP Plc.
"The oil-price outlook is a long U, it will go down and stay down for a long time," Peter Mather, BP's group regional vice president for Europe and head of UK, said Thursday at a conference in Brussels.
Brent crude, the international benchmark, is trading at about US$49 a barrel compared with US$99 a year ago. Prices have been pushed down by surging production in Saudi Arabia, Russia and North America and slowing economic growth in China, the largest oil consumer after the US.
BP and global peers including Royal Dutch Shell Plc have responded by cutting spending and selling assets. Many have used their refining operations to help offset dwindling revenue from oil and gas extraction, since low crude-oil costs make fuel production more profitable.
The recent revival in refining margins in Europe hasn't eliminated the industry's "structural issues," according to Mather, who said companies must raise efficiency to cut costs. "Lower prices may bring welcome respite for the refining industry but not necessarily an enhancement of Europe's competitiveness relative to other areas that have lower costs," he said.
Refineries in northwest Europe currently earn 24 per cent more than a year ago and the most for this time of year since 2012, BP data show.
Opec expects the average price of its crude oil to rise to US$80 a barrel by the end of the decade as suppliers from outside the group cut back, according to a research report seen by Bloomberg News. Meanwhile Goldman Sachs said this week that the glut of crude may keep prices low for the next 15 years.
BP has dropped 16 per cent this year in London trading. Shell, Europe's biggest oil company, has declined 26 per cent while Total SA, the second-largest, has slipped 1 per cent in Paris. The nine-member FTSE 350 Oil & Gas Producers Index has lost 18 per cent.