BP expects oil price to increase in second half of 2016
22 February 2016
BP has predicted a positive future for the oil and gas industry with crude prices returning up to a peak of $100 a barrel at times, large increases in shale output and new production from Canadian tar sands. The predictions are contained in the latest annual BP Energy Outlook, which looks at long-term trends and develops projections for world energy markets up to 2035.
The oil major believes fossil fuels will still be providing 80% of total energy supply in 2035 and considers that, under this scenario, carbon emissions will increase.
"In the middle of a downturn in oil and gas prices, it is important not only to adapt to the current tough conditions, but also to prepare for the next set of challenges," said BP’s chief executive, Bob Dudley. At the recent International Petroleum Week conference in London, Dudley said he expected the oil price to rally in the second half of 2016.
BP chief economist Spencer Dale said he expected an improvement away from a current level of just above $30 a barrel, with prices rising up to $100 on occasion. He also believes the nimbler US shale gas industry will change how oil markets behave over the next 20 to 30 years.
"What we know from history is that the oil market takes an awful lot longer to adjust to supply shocks than it does to cyclical demand shocks," Dale told BP's in house magazine.
"Interestingly, though, US shale is far more price responsive, because a producer can set themselves up and start drilling very quickly. Moreover, if the price falls it's a lot easier to reduce production. Consequently, the supply features of the oil market are changing and over the next 20-30 years, price volatility might fall as a result."
The group expects carbon emissions to grow by almost 1% a year for the two decades, suggesting the need for further policy action such as a meaningful price for carbon, it said in its outlook.
The outlook predicted that tight oil – mainly US shale – would rise from around 4m barrels of oil equivalent to 8m in the 2030s. It added that US shale gas could provide almost 20% of the world’s supplies within 20 years.
BP also forecast a major future increase in output from non-Opec production in deep water Brazilian fields and the Canadian tar sands.
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