Supply disruptions and the lag time associated with OPEC’s ability to increase production could send oil prices to $100 a barrel, but this isn’t good news for the economy and the oil industry, Total’s chief executive Patrick Pouyanne told Bloomberg in an interview.
Disruptions in supply coming from Iran, Venezuela, and Libya give strong support to oil prices and they may head into triple-digit territory, according to Pouyanne, who reminded Bloomberg television that he predicted this development as early as in June this year.
On the other hand, although OPEC has pledged to boost production, output hasn’t increased so much, Pouyanne told Bloomberg.
Saudi Arabia has capacity of 11 million bpd, but boosting production from current levels would need time, because they have to mobilize rigs.
“You don’t push a button and then oil flows. It’s more complex than that,” Pouyanne said.
Total’s chief executive believes that $100 oil is a real possibility, but he is not especially thrilled with it.
“I’m not sure it’s good news, by the way, for the world economy, even for the oil industry, because you know, when price goes too high then you open the door to your competitors and competition and demand will fall again,” the manager said.
Pouyanne is joining a growing number of industry executives and analysts who have started to predict that $100 is now a real possibility, with Iranian sanctions expected to remove more than 1 million bpd from the oil market, on top of the likelihood that Venezuela’s production will drop further and Libya’s supply will face further interruptions thanks to security troubles.
In a tightening oil market, this past weekend an OPEC/non-OPEC panel congratulated itself on the job well done so far, and said it was satisfied with the “overall healthy balance between supply and demand,” snubbing calls by U.S. President Donald Trump to lower oil prices.
The wait-and-see approach by OPEC and Russia sent oil prices surging to their highest in four years, and major oil traders started to call $100 oil, saying it could be here soon amid higher market and geopolitical risks.
By Tsvetana Paraskova for Oilprice.com
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