Oil market volatility expected to extend well into next year
Volatility in oil markets is expected to extend into next year, the CEO of Italian energy company Eni said on Monday.
Speaking at an industry event in Abu Dhabi, Claudio Descalzi said the volatility could hamper investments in new oil and gas production.
Eight members of OPEC+, which groups the Organization of the Petroleum Exporting Countries plus Russia and other allies, agreed on Sunday to delay a planned December oil output increase by one month due to weak demand in China and rising supplies.
“As soon as (OPEC) say we’re going to release some production, the price went down immediately. Now they say we postpone until the end of the year, and that has made a big impact on the market... the volatile situation is not good,” Descalzi said.
“Everybody says we need energy, but with this kind of volatile situation, and this volatility is not really helping investment” in new oil and gas production, he said.
BP CEO Murray Auchincloss as well as Shell CEO Wael Sawan told the panel that tensions in the Middle East topped the risks facing energy markets.
Escalating tensions between Israel and Iran since last October have stoked concerns over supply disruptions in the Gulf, which produces and exports around 20% of the world’s oil and gas, pushing oil prices higher.
Turning to the upcoming U.S. presidential elections, Auchincloss said that the biggest challenge the United States faces is regulatory reform to allow permits for new investments in energy, particularly renewables and low-carbon projects.
Auchincloss also said that the world would require a lot of new investment in oil and gas in order to maintain supplies, regardless of a possible settling of demand in the coming years.
Meanwhile, oil prices slipped on Thursday after big gains a day earlier linked to post-election movements in the US dollar.
Global benchmark Brent fell toward $74 a barrel. West Texas Intermediate traded near $71
While conflict in the Middle East means there is a continued risk to supply, demand remains subdued thanks to sluggish global growth.
The Trump re-election also looks like a trigger for a boost to supply in the US, where he’s expected to relax environmental and regulatory curbs, which would put downward pressure on prices.