BP’s Atlantis platform in deepwater Gulf of Mexico. Photo (c) BP Plc
By Will Kennedy and Ryan Chilcote
(Bloomberg) — BP Plc boss Bob Dudley is very bearish on the price of oil. He says this feels the same as 1986, when oil slumped from $30 a barrel to $10 and didn’t recover until Iraq invaded Kuwait in 1990.
“The fundamental supply and demand does remind me of 1986 a bit, where we could go into a period in this decade of lower oil prices,” Dudley said a Bloomberg TV interview, adding prices may stay in a range below $60 for as long as three years. “It will be a long time before we see $100 again.”
His view puts him at odds with others in the industry. Claudio Descalzi, chief executive officer of Italy’s Eni SpA, said last month he expects prices to rebound before the end of the year and then head toward $90 barrel. OPEC Secretary-General Abdalla El-Badri warned last week that prices could boomerang to $200 a barrel as the oil industry takes an ax to investment in new projects.
The price of New York crude futures will average $74 next year and $75 in 2017, according to the average forecast of analysts surveyed by Bloomberg. Oil rose for a third day to $50.82 on Tuesday, but remains less than half its June high of $107.
For Dudley, 59, an American who became CEO at London-based BP in 2010, the immediate issue is a global glut of crude oil, which will take some time to unwind.
“We do have stocks filling up around the world,” said Dudley. “China which is still growing, for sure, it’s just not as much as it did. All these things have led to lots of stocks building up and you may start seeing it filling up some ships. And when, traditionally, that happens in can go on for quite a while.”
Saudi Arabia’s decision not to support an OPEC production cut last year in response to growing production from shale fields in North America sent the market into a tailspin, forcing the industry to change tack quickly.
BP pledged to cut about $2 billion of planned spending today in response to the drop in prices, mirroring similar moves by competitors including Royal Dutch Shell Plc and ConocoPhillips.
The industry works to a long cycle, though, and it will take a while for lower investment to feed through into the oil market, Dudley said.
–With assistance from Nidaa Bakhsh in London.
Copyright 2015 Bloomberg.
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