Lake of fire or not, the oil market has certainly become increasingly alarmed by vast pools of excess crude stored in tanks around the world, with more added every day. At the conference, senior executives and officials outlined a path for prices that remains low in the short term, somewhat higher by year-end and subject to furious swings along the way.
The direction of oil prices matters greatly outside energy hubs such as Houston. Oil influences inflation and lately seems to have guided equity markets. Stanley Fischer, vice-chair of the Federal Reserve, told the conference the price of oil had become a macroeconomic issue. The rout has hurt not only producers, but pipeline partnerships such as Enterprise, once a popular bet for yield-seeking investors.
Veteran oilmen tend to shy away from forecasting prices, a humility born of surviving multiple busts. In the past 30 years the industry has endured four: in 1986, 1998, 2009 and now. Stephen Chazen, chief executive of Occidental Petroleum, warned of a “false bottom — or two or three or four”.
The current bust has been severe, yanking crude prices down 70 per cent since mid-2014 to $30 a barrel. No one expects a rebound of similar speed.
“You’ve heard everybody talk about a V, a W, an L, a bathtub, all kinds of words” with regard to future oil prices, said Lamar McKay, deputy group chief executive of BP. “I don’t think we’ve found a word to describe it yet. But it doesn’t feel like a V or a W.”
Three factors are critical to any recovery. One would be a reversal in the accumulation of stocks that total more than 3bn barrels in western countries alone, according to the International Energy Agency.
IEA expects stocks to keep building at a rate of 1.1m barrels a day this year, finally levelling off in 2017. But industry executives and officials at CERAWeek expressed considerable uncertainty over the schedule.
Mark Papa, partner at Riverstone, a private equity firm, and former chief executive at shale oil and gas producer EOG Resources, eyed a span of six to 24 months for the market to come into balance. When it does, he expected prices to settle at about $65-$75 a barrel.
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