The thousands of attendees seeking reasons for optimism didn’t find them at the annual International Petroleum Week that ended Thursday in London.
Instead, as Bloomberg reports, they were greeted by a cacophony of voices from some of the largest oil producers, refiners and traders delivering the same message: There are few reasons for optimism. The world is awash with oil. The market is overwhelmingly bearish.
Producers are bracing for a tough year. Prices will stay low for up to a decade as Chinese economic growth slows and the U.S. shale industry acts as a cap on any rally, according to Ian Taylor, chief executive officer of Vitol Group, the world’s largest independent oil trader.
Even refiners, whose profits have held up better than expected, are seeing a worsening outlook.
“The oil industry is facing a crisis,” says Patrick Pouyanne, CEO of Total SA, Europe’s biggest refiner. BP boss Bob Dudley describes himself as “very bearish” and joked that the surplus is so extreme that people will soon be filling swimming pools with crude.
As the world runs out of places to store oil, “I wouldn’t be surprised if this market goes into the teens,” says Jeff Currie, head of commodities research at Goldman Sachs Group Inc.
Crude prices surged briefly last month on speculation the Organization of Petroleum Exporting Countries would team up with Russia to cut production. The head of the nation’s biggest oil company had other ideas.
“Tell me who is supposed to cut?” says Igor Sechin, CEO of Rosneft. “Will Saudi Arabia cut production? Will Iran cut production? Will Mexico cut production? Will Brazil cut production? Who is going to cut?”
Supply exceeds demand by as much as 1.7 million barrels a day, so cutting 1 million from production would in theory make prices more “reasonable,” Sechin says. Nevertheless, Rosneft is focused on preserving its traditional markets against the competition.
