didn't say when...
OPEC’s El-Badri Says $200 Oil Possible With Lack of Spending (2)
2015-01-26 14:54:39.860 GMT
(Updates with analyst comment in 10th paragraph.)
By Grant Smith
(Bloomberg) -- OPEC’s secretary-general said oil prices as
high as $200 a barrel are possible if producers fail to invest
in new supply. Crude futures pared losses in London and New
York.
“If you don’t invest in oil and gas, you will see more
than $200,” Abdalla El-Badri said in an interview in London on
Monday, without giving a timeframe. Brent, a global benchmark,
erased a decline immediately after his comments, before resuming
its slide..
Crude prices tumbled 48 percent last year as Saudi Arabia
and other members of the Organization of Petroleum Exporting
Countries said they wouldn’t curb output in response to a supply
glut. The International Energy Agency, the Paris-based adviser
to 29 nations, said Jan. 21 that a decline in prices may deter
investment in all types of energy.
“He is raising a valid concern that falling investments
due to the current price collapse may leave us with little oil
coming out of the ground in a few years time,” Ole Sloth
Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e-
mail. “A move back above $100 will bring the shale oil drillers
out in force as they can relatively quickly react to rising
prices” meaning $200 probably won’t happen.
Investments Canceled
The global oil market is currently oversupplied by about
1.5 million barrels a day and OPEC is open to a meeting with
nations outside the 12-nation group to tackle the glut, El-Badri
said today. The market will be brought back into balance by a
reduction in supply, rather than an increase in demand, he said.
Investment in oil production will fall by $100 billion, or
15 percent, this year compared with 2014, Fatih Birol, chief
economist at the IEA, said Jan. 21 at the World Economic Forum
in Davos, Switzerland. This means oil at $45 a barrel will be a
temporary phenomenon, he said.
Brent crude for March settlement rose as high as $49.29 on
the ICE Futures Europe exchange in London, and was trading at
$48.48 at 2:35 p.m. local time. West Texas Intermediate, the
main U.S. grade, advanced as much as 1.1 percent to $46.11 on
the New York Mercantile Exchange, before falling to $45.43.
U.S. crude production rose to 9.19 million barrels a day on
Jan. 9, the fastest pace in three decades, according to the
Energy Information Administration, the Energy Department’s
statistical arm. The boom was driven by a combination of
horizontal drilling and hydraulic fracturing, or fracking, which
has unlocked supplies from shale formations including the Eagle
Ford and Permian in Texas and the Bakken in North Dakota.
Drilling Rigs
As prices slumped, oil drillers have reduced the number of
rigs operating in the U.S. to the lowest in two years, according
to data from Baker Hughes Inc. Jan. 23. Companies idled 49 U.S.
oil rigs last week, bringing the total to 1,317 in the seventh
weekly decline, it said.
“The current price cannot sustain non-OPEC supply where it
was going the last year or so,” Robert Campbell, head of oil
products research at London-based Energy Aspects Ltd., said by
phone from New York. “This is not just U.S. shale, this is all
sorts of places: North Sea, Russia.”
Most projects to develop oil resources in OPEC members will
proceed at current prices, although some may be canceled, El-
Badri said.
For Related News and Information:
Top Stories: TOP <GO>
Shipping Analysis: BI SHIP <GO>
Ship Tracking: BMAP V <GO>
--With assistance from Naomi Christie and Rupert Rowling in
London.
To contact the reporter on this story:
Grant Smith in London at +44-20-3525-7353 or
gsmith52@bloomberg.net
To contact the editors responsible for this story:
Alaric Nightingale at +44-20-3525-3488 or
anightingal1@bloomberg.net
James Herron, Rachel Graham
2015-01-26 14:54:39.860 GMT
(Updates with analyst comment in 10th paragraph.)
By Grant Smith
(Bloomberg) -- OPEC’s secretary-general said oil prices as
high as $200 a barrel are possible if producers fail to invest
in new supply. Crude futures pared losses in London and New
York.
“If you don’t invest in oil and gas, you will see more
than $200,” Abdalla El-Badri said in an interview in London on
Monday, without giving a timeframe. Brent, a global benchmark,
erased a decline immediately after his comments, before resuming
its slide..
Crude prices tumbled 48 percent last year as Saudi Arabia
and other members of the Organization of Petroleum Exporting
Countries said they wouldn’t curb output in response to a supply
glut. The International Energy Agency, the Paris-based adviser
to 29 nations, said Jan. 21 that a decline in prices may deter
investment in all types of energy.
“He is raising a valid concern that falling investments
due to the current price collapse may leave us with little oil
coming out of the ground in a few years time,” Ole Sloth
Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e-
mail. “A move back above $100 will bring the shale oil drillers
out in force as they can relatively quickly react to rising
prices” meaning $200 probably won’t happen.
Investments Canceled
The global oil market is currently oversupplied by about
1.5 million barrels a day and OPEC is open to a meeting with
nations outside the 12-nation group to tackle the glut, El-Badri
said today. The market will be brought back into balance by a
reduction in supply, rather than an increase in demand, he said.
Investment in oil production will fall by $100 billion, or
15 percent, this year compared with 2014, Fatih Birol, chief
economist at the IEA, said Jan. 21 at the World Economic Forum
in Davos, Switzerland. This means oil at $45 a barrel will be a
temporary phenomenon, he said.
Brent crude for March settlement rose as high as $49.29 on
the ICE Futures Europe exchange in London, and was trading at
$48.48 at 2:35 p.m. local time. West Texas Intermediate, the
main U.S. grade, advanced as much as 1.1 percent to $46.11 on
the New York Mercantile Exchange, before falling to $45.43.
U.S. crude production rose to 9.19 million barrels a day on
Jan. 9, the fastest pace in three decades, according to the
Energy Information Administration, the Energy Department’s
statistical arm. The boom was driven by a combination of
horizontal drilling and hydraulic fracturing, or fracking, which
has unlocked supplies from shale formations including the Eagle
Ford and Permian in Texas and the Bakken in North Dakota.
Drilling Rigs
As prices slumped, oil drillers have reduced the number of
rigs operating in the U.S. to the lowest in two years, according
to data from Baker Hughes Inc. Jan. 23. Companies idled 49 U.S.
oil rigs last week, bringing the total to 1,317 in the seventh
weekly decline, it said.
“The current price cannot sustain non-OPEC supply where it
was going the last year or so,” Robert Campbell, head of oil
products research at London-based Energy Aspects Ltd., said by
phone from New York. “This is not just U.S. shale, this is all
sorts of places: North Sea, Russia.”
Most projects to develop oil resources in OPEC members will
proceed at current prices, although some may be canceled, El-
Badri said.
For Related News and Information:
Top Stories: TOP <GO>
Shipping Analysis: BI SHIP <GO>
Ship Tracking: BMAP V <GO>
--With assistance from Naomi Christie and Rupert Rowling in
London.
To contact the reporter on this story:
Grant Smith in London at +44-20-3525-7353 or
gsmith52@bloomberg.net
To contact the editors responsible for this story:
Alaric Nightingale at +44-20-3525-3488 or
anightingal1@bloomberg.net
James Herron, Rachel Graham