Politics driving oil prices again- Eni CEO
Petroleumworld 01 25 2018
Oil prices are more susceptible to political events than in the past few because of a dwindling global supply cushion, the chief executive of Italy's energy firm Eni Claudio Descalzi said.
Speaking to Reuters on the sidelines of the World Economic Forum in Davos, Descalzi said that production cuts by OPEC members and Russia and a lack of investment in new fields were increasingly tilting the market into a supply deficit, setting the stage for stronger oil prices.
But rising U.S. shale production, which is set to grow by 1 million barrels per day (bpd) this year, means that oil prices would average between $60 and 65$ in 2018, he said.
Oil prices have risen by over 50 percent since the middle of last year as the OPEC supply cut pact took effect, reaching $70 a barrel, levels not seen since late 2014.
Unlike in previous years, political events also boosted prices.
These include a collapse in oil supplies in Venezuela, disruptions in Libya and concerns over exports from Iran, OPEC's third largest producer, should the United States revive sanctions on the country.
“Prices haven't been so sensitive to geopolitical events because we had a big inventory cushion,” Desclazi said.
“Today we no longer have an inventory cushion or a large spare capacity. We have a system which is very price sensitive and runs with no spare capacity.”
”In this context, any geopolitical event can create a price spike.
Descalzi said he expected oil demand to expand in 2018 by around 1.3 to 1.5 million barrels per day (bpd).
“By the end of the year inventories may go down again by 150 to 200 million barrels and fall below the multi-year averages, and it won't be easy to push U.S. output higher at the same levels in 2019. ” Descalzi said.
; Writing by Ron Bousso. Editing by Jane Merriman from Reuters.
reuters.com 01 24 2018
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