“Shale oil is too expensive. Let’s concentrate on low-cost oil. Don’t tell me I need to invest in the highest technology barrels because low-cost oil is the answer to volatility and peak oil.”
Patrick Pouyanne, CEO of Paris-based Total, explaining why he isn’t expanding assets in the hot US shale oil market.
Oil prices continued to slide last week with Brent falling below $45 on Thursday and WTI falling below $43. Prices have now dropped by more than 20 percent since the start of the year, and Brent crude will likely post its worst first half since 1997. As normal of late, prices fell on increasing production in the US, Canada, Nigeria and Libya with little solid indication that the OPEC/NOPEC consortium is yet willing to make further production cuts. While the sharp production gains in Libya and Nigeria are recoveries from geopolitical production outages, some are forecasting that the surge in US shale oil production could run on into 2018 provided oil prices remain high enough to support additional growth.
“This year’s [New Energy Outlook] report suggests that the greening of the world’s electricity system is unstoppable, thanks to rapidly falling costs for solar and wind power, and a growing role for batteries, including those in electric vehicles, in balancing supply and demand.”
Seb Henbest, Bloomberg’s New Energy Finance lead author
In the last month, US oil prices have fallen from close to $52 a barrel to below $45. Partly due to the large exports of US crude which have been around 1 million b/d in recent weeks, London prices have been running only about $2 a barrel higher than the US. Last week a report from the IEA predicting that the oil glut would continue into 2018 or beyond, combined with an unexpected jump in US commercial petroleum stocks, to push oil prices down by $2 a barrel to touch a low of $44.50 on Thursday before a slight recovery on Friday.
“As battery costs fall and their energy density increases, we could see cheaper battery-electric cars than their fuel-burning equivalents by 2030.”
Nikolas Soulopoulos, a London-based analyst with Bloomberg LP.
During the past month, there have been several important developments which could have a major impact on the course of oil prices and production in the next few years. First was the OPEC/NOPEC decision to extend the current 1.8 million b/d production cut for another 18 months despite increasing evidence that increasing US shale oil output and rebounding Libyan and Nigerian production are offsetting the production cut. Because of the timid nature of the OPEC decision, increasing stockpiles and higher oil production, the price of crude has fallen some 11-12 percent in the last three weeks leaving US futures below $46 and Brent below $48 a barrel.
