Oil bosses see $60 oil as breaking point for shale growth

Top executives at big business, U.S. shale and national oil companies remain optimistic about the oil market in the medium and long term, hoping that rising demand and falling oil prices will eventually rebalance supply and demand in the face of the looming glut.

At the Energy Intelligence Forum in London this week, oil bosses acknowledged near-term bearish fundamentals as supply growth outpaces demand growth. But they also see that the market will rebalance in the medium term and that supply will have difficulty meeting demand in the long term.

Everyone agrees that there will be excess in the short term; Projections vary only on how large the supply glut will be later this year and early next year.

The International Energy Agency (IEA) warned this week, again, that skyrocketing supply and “moderate” demand would inflate excess supply to record levels.

Rising supply from the Middle East, combined with strong flows from the Americas, boosted oil over water in September by a whopping 102 million barrels, equivalent to 3.4 million barrels per day (bpd), which is the biggest increase since the pandemic, the agency said in its monthly report.

Related: North Sea oil: booming in Norway and doomed to fail in the UK

“Looking ahead, as significant volumes of in-water crude oil shift to major oil hubs, crude oil stocks appear to rise while NGLs begin to fall,” the IEA noted.

Oil executives may be worried about falling oil prices and declining profits in the short term, but they have seen their fair share of periods of oversupply and remain optimistic about the medium and long term.

“Basically, the short-term market is a little bit bearish,” Patrick Pouyanne, CEO of TotalEnergies, said on the forum.

“But we are quite optimistic in the medium term,” the executive added, pointing to declining production rates and continued growth in global oil demand.

Non-OPEC crude production will begin to decline when oil prices are at $60 a barrel or less, Pouyanne said.

“There is a point at $60 a barrel where we will see the shale industry start to slow down,” Pouyanne said on the sidelines of the forum, as reported by Reuters.

“Our view is that from mid-2026, non-OPEC supply will be much lower, there will be no growth, and then OPEC will regain control of the market,” said the senior TotalEnergies executive.

Ryan Lance, president and CEO of ConocoPhillips, said that “At $60-$65 a barrel for WTI oil, the United States has probably stagnated.”

U.S. oil production could grow by 300,000 to 400,000 bpd this year, Lance said.

“But if prices stay at $60 or rise to $50, they are probably stagnating or declining slightly,” the executive added.

ExxonMobil CEO Darren Woods believes the glut will only be a short-term issue in markets, and the bigger question will be how supply will meet demand in the medium to long term.

“Oversupply in the oil market will likely be a short-term problem, as demand from emerging economies will make meeting global energy demand more difficult in the medium and long term,” Woods said at the forum in London.

“We continue to do the same thing under the Biden administration and under the Trump administration,” the senior Exxon executive said.

Exxon “looks beyond political cycles and thinks fundamentally about the long-term fundamentals of economic growth around the world.”

Amin Nasser, chief executive of Saudi state oil giant Aramco, said in a speech at the forum that the energy transition faces a reality test and the reality on the ground points not to an energy transition but to “an energy addition that requires all hands on deck.”

“We also see resilient demand, and the pressing need for long-term investments in supply is now widely accepted. Therefore, our growth potential in oil remains large,” Nasser said.

Despite the short-term bearish fundamentals, the long-term outlook and the need for more supply within a few years remains intact, according to executives.

“The key strategic question for companies like mine and others is, where will conventional oil come from to meet demand in the face of stagnating or peaking U.S. unconventional supply, as demand continues to grow,” said ConocoPhillips’ Lance.

By Tsvetana Paraskova for Oilprice.com

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