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Oil Executives See More Volatility as Market Starts to Rebalance

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(Bloomberg) — Crude markets will continue to be plagued by volatility in the short and medium term after suffering the biggest downturn in a generation over the past two years, according to oil-company executives gathering for one of the industry’s biggest conferences in Norway.

“The volatility is here to stay,” said ConocoPhillips Chief Executive Officer Ryan Lance said on the sidelines of the ONS Conference in Stavanger on Monday. Market rebalancing “will extend into 2017. The inventory levels are still quite high.”

The industry remains on guard as oil entered a bull market Aug. 18, less than three weeks after tumbling into a bear market. Prices have gained 19 percent in the past four weeks on speculation OPEC nations and other producers could agree to cap output at a meeting in Algeria next month. While markets are expected to rebalance as they gradually absorb a glut of crude stocks, analysts differ over the timing.

“Basically, volatility is the word,” said Martin Bachmann, head of exploration and production in Europe and the Middle East at Wintershall AG. “There will be a rebalancing. Over what timeframe is the big question.”

It may take time for markets to strengthen and there will be great uncertainty in the meantime, Statoil ASA CEO Eldar Saetre said in an interview in Stavanger.

Market Balance

Some industry observers are more optimistic. Daniel Yergin, vice chairman of consulting firm IHS Inc., said oil supply and demand will balance this year, adding that spending on onshore oil and gas will increase in 2017.

“The rebalancing in the oil market is already happening,” according to Norway’s Petroleum and Energy Minister Tord Lien. Still, “parts of the supplier industry will continue to have demanding months ahead.”

Oil declined on Monday amid doubts producers will agree on a deal to stabilize the market when suppliers meet next month for informal talks. Iran’s plan to continue boosting crude output until it regains its pre-sanctions OPEC market share is dimming prospects of collective action, according to Patrick Allman-Ward, CEO of Dana Gas PJSC. A deal to freeze output was proposed in February, but a meeting in April ended with no final accord.

The oil market should achieve stability soon, United Arab Emirates Oil Minister Suhail Al Mazrouei said in a Twitter post. Any decision to stabilize the market will require the full participation of all OPEC members and major suppliers from outside the group, Al Mazrouei said.

By Mikael Holter and Rakteem Katakey.

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