Oil prices, which earlier this morning broke through a key psychological level of $50 a barrel, are likely to continue recovering into next year as supplies tighten—but that recovery is still fragile and the path ahead is rocky, company executives tell The Wall Street Journal.
“We’re in a little bit of an upswing at the moment and everybody’s got a smile on their face because we might be at $50 a barrel. But two weeks ago we were at $40 and falling. It’s not a very helpful backdrop to plan a long-term business,” Premier Oil CEO Tony Durrant tells the newspaper.
The oil and gas sector has been rocked by the rout in oil prices that have more than halved from a mid-2014 high of around $115 a barrel to a low of $27 in January. Oil prices have climbed around 15% this month largely on talks of a potential output freeze among major producers.
The length of the downturn has forced oil companies to slash around $1 trillion in spending on new oil and natural gas output from the shale fields of Texas to the deposits in the North Sea, according to energy consultancy Wood Mackenzie—a factor that is expected to lead to a big drop in oil supplies and higher prices, executives and analysts say.
That drop in investment is still being played out across the industry as companies continue to slash investment in new and current operations, says Durrant of Premier, one of the U.K.’s largest independent oil companies with operations from the U.K. North Sea to the Falkland Islands.
Earlier in the week, Robin Watson, the CEO of oil services company Wood Group, predicted the end of low oil prices could be in sight.
“It certainly feels like we’re around the bottom,” he said. “We were quite encouraged with where the oil price was in the second quarter, though it did then reduce over the course of July, so confidence remains fragile.”
The Wall Street Journal has the full story.
