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Shell Expects $60 Crude Through End of Decade

Oil prices are expected to go up as a result of the tightening of the market.Oil prices are expected to go up as a result of the tightening of the market.

It is "not unreasonable" to expect oil prices at $60 a barrel by the end of the decade, Royal Dutch Shell CEO Ben van Beurden told CNBC's "Managing Asia". To be sure, that is not a large rise from current levels.

Van Beurden said forecasting oil prices in the short term was "very difficult," but he still expected gains, CNBC reported.

"I do think oil prices are going to go up over time as a result of the tightening of the market. It's not unreasonable to expect that if you want to make financial projections going out in the future, you want to make projections around $60 oil by the end of the decade," he said.

He noted that growth in oil demand has been fairly consistent, increasing approximately 1.6 million to 1.7 million barrels a day, with the exception of outlier years affected by events such as the financial crisis.

"Supply in the oil markets, however, was a considerably more complicated picture," he explained.

"It's a mix of OPEC, it's shale, it's large complex projects and they each have their own dynamic in terms of response time to prices ... And on top of it, there's a lot of sentiment that is feeding the markets."

But the slim gains in oil prices did not appear likely to have an outsized impact on the company's performance.

Royal Dutch Shell expects to have a "significant, higher amount" of free cash flow with oil at $60 a barrel than when it was at $90 years ago, van Beurden said.

"Nobody can predict how it's going to play out," he said, adding that those in the commodity business needed to be prepared for downturns.

"Therefore, our mindset needs to be building resilience. And you do it with a 'lower forever' mindset," he said.

By ensuring that projects had the lowest possible break-even price, the company would be able to survive even if oil prices came down further, van Beurden said.

"If you have a strategy that is predicated on really trying to understand what the future of the oil price is going to be, and then betting on it, I think you're basically betting the company. So you should never have that as a philosophy," he explained.

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