Running Out of Time to Reduce Stockpiles in 2017, Statoil SaysBy and
Oil prices will recover but unclear when, says chief economist
OPEC cuts unlikely to correct market under current conditions
The oil market is running out of time for crude inventories to show a significant drop in 2017, according to Statoil ASA’s chief economist.
When it comes, though, the correction "will be relatively rapid," said Eirik Waerness in an interview at Bloomberg headquarters in New York.
Analysts have been surprised by the intransigence of global oil stockpiles, according to Waerness. That’s because the focus has been mostly on U.S. shale, missing the "flow of oil from projects that were decided back in 2010” and now are coming online. Production is even increasing in the North Sea, where analysts expected a decline, he said.
This makes it more difficult for OPEC to increase prices, according to Waerness.
"At some point, impact from an ebbing flow of projects will slow down," he said. "Patience is the name of the game. Current prices are unsustainably low. Producers are not making enough to cover production cost."
West Texas Intermediate, the U.S. benchmark, closed at $43.01 a barrel on Friday. Prices in New York have declined 19.8 percent this year, dropping more than 20 percent below the 2017 high on Wednesday to slip into a bear market amid an ongoing supply glut. Drillers added rigs to the shale patch for a record 23rd straight week, according to Baker Hughes Inc. data reported Friday.
Unlike the International Energy Agency, Statoil expects oil demand to peak in 2030 under its central scenario. That is too late to meet the temperature target outlined in the Paris Climate agreement.
"Peak oil has to happen extremely rapidly, by 2022, or we won’t reach that target," said Waerness.