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Page added on February 12, 2019

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Will Oil Ever Hit $100 Again?

Consumption

Oil will hit $100 per barrel again, according to RoseAnne Franco, head of oil and gas at global risk consultancy Verisk Maplecroft.

“It’s a question of when and will it stay there … the level of geopolitical uncertainty we confront today is particularly volatile and precisely the type of conditions that could lead to an oil price shock,” Franco told Rigzone.

“That said, the uncertainty appears to cut both ways as global economic growth, which supports higher oil demand, is vulnerable to heightened geopolitical risk, which erodes it,” Franco added.

Fundamentals don’t appear to support such higher price levels this year, according to Franco. The Verisk Maplecroft representative stated however that “beyond 2020, an oil supply crunch due to the retrenchment in spending in the oil patch coupled with a perfect storm on the geopolitical end could easily trigger another price shock.”

Offering his view, Devin Geoghegan, Genscape’s global director of petroleum intelligence, told Rigzone that “unless electric cars become the unicorn of demand growth deceleration, $100 oil seems highly likely at some point during the next 10 years.” The Genscape director added however that there are “very real headwinds” to reaching that figure again.

“First, stagnant or declining demand could cause an abrupt shift lower in multi-year supply need expectations,” Geoghegan said.

“Second, technology could conceivably continue pushing break-evens lower through either improving costs in currently uneconomic areas or by opening yet to be developed shale oil outside the U.S. The most likely near-term impact would be the continued lowering of offshore development costs,” Geoghegan added.

Outlining further headwinds, Geoghegan said new plays can still be discovered and even existing plays that have had a decline in activity could become resurgent due to higher prices. The Genscape representative also claimed that an “outside risk” would be if certain countries were able to reverse course and regain historical production highs.

Possible, But Probably Not Sustainable

PwC’s Aberdeen Office Senior Partner, Kevin Reynard, believes it is “feasible” that the oil price will surpass the $100 mark, but thinks very high oil prices for a sustained period are “hard to envisage.”

“It is possible that we could see oil prices spike if demand rapidly outpaces supply, which has not been the case in recent years. That said, there remains concerns that there could be a price spike in the medium term should a supply crunch emerge against a backdrop of strong demand,” Reynard told Rigzone.

“Whether or not this sees the price surpass the $100 mark again depends on a number of factors but given the expected lifecycle of hydrocarbons and long-term inflation it is feasible, though very high oil prices in relative terms for a sustained period as we witnessed pre-2014 are hard to envisage,” he added.

Giving his opinion, EY’s Global Oil & Gas Senior Analyst, Paul Bogenrieder, outlined that $100 oil is “certainly possible” but “probably not” sustainable.

“If prices were to move near to or above $100 for any length of time, the market would respond and bring a lot of oil forward. That would be enough to bring prices down below that level,” Bogenrieder told Rigzone.

Not the Preferred Option

Oil prices over $100 per barrel are not the preferred option for either producers or consumers, according to Interfax Energy Senior Energy Analyst Abhishek Kumar, who believes such prices are “unlikely” to happen as long as the OPEC+ group continues to manage the market.

“Excessively high prices will lead to demand destruction whereas prices too low are not conducive for upstream investment,” Kumar told Rigzone.

“It is becoming increasingly clear that a price range of $50 to $80 per barrel will work well for the OPEC+ and their clients. Consequently, the chance of prices moving beyond this range for a prolonged period are low,” he added.

“Nevertheless, unforeseen geopolitical and economic events such as in Iran and Venezuela will have the potential to render price shocks, which could move prices beyond the range,” Kumar continued.

RIGZONE



3 Comments on "Will Oil Ever Hit $100 Again?"

  1. Free Speech Message Board on Tue, 12th Feb 2019 10:53 pm 

    Socialists want Communism to destroy Capitalism, but what if the elites are pushing Socialism to kill off the 99%?

  2. Sissyfuss on Wed, 13th Feb 2019 9:06 am 

    FSF, the elites would only that if they thought they had enough saved to get by. The elites will never gave enough, it’s their genetic imperative to have it all.

  3. Davy on Wed, 13th Feb 2019 10:20 am 

    I don’t see a certainty on any particular price nor a particular duration of any high or low periods. We have volatility in the geopolitical and the economic sphere. A prolonged recession even a modest one will hit oil consumption demand growth hard. It might even stop it in its tracks. Shale has proven a supply moderator if the global economy avoids a slowdown but for how long? Will the global central banks manage global liquidity such that a hard landing is not in the cards? I see an economic downturn in 2019 but for how long. Renewables are coming on strong at least for grid power. EV’s have potential but also fuel cells. Maybe Nat gas powered cars too. This is the other side of the equation with tech. Tech now has the potential to change the traditional oil demand equation. Yet, tech will be just as vulnerable to economic winds as oil demand growth. It appears oil demand will continue if allowed because populations are rising and becoming more affluent but that does not mean demand growth increases might not be tempered greatly by economic decline and the rise of new tech

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