The global oil market has not yet shown clear signs that it has reached a turning point, and if oil prices stay relatively stable, U.S. shale production will rise significantly next year and possibly destabilize the market again, Rosneft’s chief executive Igor Sechin said on Thursday.
“The analysis shows that the announced goal of inventories stabilization has not been fully implemented and it is too early to talk about a watershed in the global market,” said Sechin, who is known for his criticism and skepticism toward OPEC’s ability to ‘fix’ the oil market.
Also on Thursday, OPEC’s Secretary General Mohammad Barkindo said that the OECD stock overhang had dropped from 338 million barrels above the five-year average at the start of this year to 159 million barrels above the five-year average in September.
According to Rosneft’s Sechin, the rebalancing of the oil market is further hampered by the lack of reliable tracking of inventories and of the supply/demand balance.
“The key task here is to create a unified system of inventory measurement and removal of stock overhang,” Sechin said, as quoted by Reuters.
Rebalancing efforts are “fragile” because if oil prices stay relatively firm, U.S. shale production will rise materially next year, according to Sechin.
“That’s why I think, we shouldn’t expect a jump in oil prices in nearest future,” Rosneft’s chief executive said.
Last month, Sechin said that Rosneft expects oil prices to average between $40 and $43 per barrel next year, and is preparing for such prices.
Just yesterday, Ian Taylor, CEO of the world’s largest oil trader Vitol Group, said that he sees the price of the Brent barrel falling to $45 in 2018, from its current price of $57-$58. Taylor is predicting a surge in oil production from US drillers—an event that would likely drag oil prices downward in 2018 to $45 per barrel.
The EIA currently expects U.S. oil production to reach 9.8 million bpd in Q1 2018, according to the latest Short Term Energy Outlook, with an average of 9.92 million bpd for the whole year.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.