(Reuters) – The global oil market will tighten in the medium to longer term, a range of oil industry executives said in London this week, maintaining optimism despite a near-term glut driven by rising output.
Production decline rates, which could accelerate as prices fall, will help to rebalance the oil market as longer-term demand is supported by rising consumption from emerging economies, the executives said.
The global oil market surplus will reach 3.6 million barrels per day in the fourth quarter, compared with a 1.9 million bpd average so far this year, the International Energy Agency (IEA) said in its monthly oil report on Tuesday.
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Rising production from both the Organization of Petroleum Exporting Countries and allies (OPEC+) and non-members has kept a ceiling on oil prices this year. Brent futures were trading around $62 a barrel on Tuesday morning, down more than $15 compared with the same day last year.
MEDIUM TERM TIGHTNESS
Oil production from producers outside of OPEC will start to decline if oil prices fall to $60 per barrel, TotalEnergies CEO Patrick Pouyanne said on Tuesday.
“Fundamentally, the short term market is a little bearish … but we are quite bullish on the medium-term,” Pouyanne said at the Energy Intelligence forum in London, citing production decline rates and no peak in global oil demand.
On Monday at the same conference, ExxonMobil CEO Darren Woods warned that decline rates could hit 15% per year without investment in unconventional oil and gas fields, and said that in his view oversupply will be a “short-term issue.”
“We see resilient demand, and the pressing need for long-term investments in supply,” Saudi Aramco CEO Amin Nasser added on Monday.
“The key strategic question for companies like mine and others is, where is the conventional oil going to come from to satisfy the demand in the face of plateauing or peaking U.S. unconventional supply, as demand continues to grow,” ConocoPhillips CEO Ryan Lance said.
Lance added that oil prices could recover to $70-75 a barrel, as in the mid-cycle supply will have to be generated to meet demand.
Reporting by Robert Harvey, Shadia Nasralla, Stephanie Kelly in London, Editing by Kim Coghill
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