Total CEO Says OPEC Needs Prolonged Cuts

OPEC and Russia will need to prolong their six-month deal to cut oil output if they plan to trim the global inventory glut that has kept a lid on prices, said Total SA Chief Executive Officer Patrick Pouyanne.

“If they really want to have an impact on the market, which means to have the inventories going down because inventories are quite high, it will have to be extended beyond May,” Pouyanne said Tuesday in a Bloomberg television interview in New York. “I’m convinced that they will do it.”

The CEO of the French oil and gas company added that he plans to keep lowering its so-called break-even point -- the oil price at which cash flow covers spending and dividends -- because he’s “not fully convinced” that tough times for the industry are over.  Factors including rising US shale oil production and increasing output from Libya may continue to have a negative impact on prices, Pouyanne said.

Oil has held above $50 a barrel since the Organization of Petroleum Exporting Countries and 11 other nations started trimming output from Jan. 1. The exporters group implemented about 90% of the pledged cuts last month.  At the same time, US crude stockpiles have kept increasing to the highest level in more than three decades and oil drillers are deploying the most rigs since October 2015.

He also expressed hope that US President Donald Trump will maintain “policies in favor” of renewable energy. He reiterated that Total will soon announce its decision on whether to develop a new petrochemical unit in Texas that will create jobs, and expand in liquefied natural gas to take advantage of cheap US shale production.

Regarding Iran, where Total has signed a pre-agreement to develop a gas field, Pouyanne said he was encouraged by recent comments from US Defense Secretary James Mattis. The French company will sign the contract if Iran respects the international nuclear treaty and if the US sticks to it, he said.