Hess Hints at Oil Recovery

Hess Hints at Oil RecoveryHess Hints at Oil Recovery

Continued demand growth and falling production should help end a protracted slump in energy prices in 2016, CEO of American integrated oil company Hess said on Thursday.

"Nothing cures a low price like a low price. The seeds have been planted for a slow recovery in oil prices," John Hess told CNBC. "It takes about two years for the market to rebalance and we're in the first year of that two-year period."

He noted that global investment in exploration and production has fallen from $700 billion last year to $550 billion this year. With US crude prices having slid to about $45 per barrel again, he said investment will sink even further in 2016.

Hess also sees deficits after capital expenditures and dividend payments for majors like Exxon Mobil and ConocoPhillips, as well as independent US producers, grow to a combined $100 billion. That leaves producers with little money to spend on reinvestment, which will ultimately drag down production.

Still, demand remains "fairly robust," Hess added, noting it is up about 1.8 million bpd this year and should be up 1.2 million bpd in 2016, even accounting for slowdown in some countries and the return of Iranian oil to the international market following the anticipated unwinding of sanctions.

"When you add demand going up next year for a 1,200,000 barrels a day, and non-OPEC going down 500,000 barrels a day, there will be room for Iran, and the markets should recover," he said.