BP predicts oil has further to fall as supply overwhelms demand
[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.
Europe's No. 3 oil producer has long held a bearish market view, with Chief Executive Officer Bob Dudley and his colleagues predicting a prolonged slump at least six times this year. That's supported by Goldman Sachs Group Inc, which this week forecast a lengthy downturn, while contrasting with a more bullish outlook from the Organization of Petroleum Exporting Countries.
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.
BLOOMBERG
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Energy & Commodities
Oil settles higher on supply concerns in the Mid-East, economic woes subdue gains
Seatrium unit to fully redeem S$500 million worth of floating-rate bonds early
Anglo rejects BHP takeover bid as significantly undervalued
India rice prices at three-month low on shrinking demand
Gold prices set for weekly decline ahead of US inflation data
Pricey coffee is here to stay as hoarding, heat hit Vietnam supply