NEWS

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,” 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 18 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 Markit, said oil supply and demand will balance this year, adding that spending on onshore oil and gas will increase in 2017.

Oil companies will need to invest about $1 trillion a year to continue to meet demand, according to Royal Dutch Shell Plc CEO Ben Van Beurden. Demand will increase by 1 million to 1.5 million barrels a day, he said on a panel discussion in Stavanger, adding that about 5 percent of supply will be lost to natural declines every year.

“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.”