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Eni’s CEO says $100/b crude oil is possible but ‘not sustainable’

A possible return to $100/b oil is likely to be short-lived given the “suffering” of industries due to high energy prices and potential for upstream producers to step up spending, Claudio Descalzi, CEO of Italy’s Eni, said Nov. 15.

Speaking at the ADIPEC conference in Abu Dhabi, Descalzi took a cautious stance on the potential return to three-figure oil prices, last seen in 2014, adding it was the stability or otherwise of price levels that would also impact on investment in new supply.

Oil industry participants have increasingly talked of a return to $100/b oil as a possibility, but with many pointing to decisions by OPEC+ producer nations as a crucial determinant.

Descalzi, however, highlighted the likely spur to activity that higher prices would represent for the US shale sector, deemed by commentators to have been in cautious mode and prioritizing debt-reduction in recent times.

Descalzi told the ADIPEC event: “I’m not sure we are going to see that [$100 oil]. If we do, it’s going to be for not a long time. It is a high price.”

“With the rebounding [prices] and recovery, a lot of industries are suffering. Now they are reducing the amount of energy they use. If the price is too high, then they’ll use less energy and the price will go down,” he said.

“$100 is not sustainable. We also have to consider that if… the situation is less volatile, we start again making investments in the upstream,” Descalzi said, going on to estimate current oil demand at “close to 100 million b/d,” with supply at 95 million-96 million b/d.

While Eni itself has strictly avoided getting involved in the US shale sector, Descalzi forecast a potential revival of industry activity there as producers step up drilling.

“If we are able to see a clear rise in front of us, we start investing again and we can fill this gap,” he said, adding that as an industry, “We can increase upstream, but if demand continues to be so strong, I imagine we will need an extra effort — from who, I think it will be the US because they have the resources, Middle East, and North Africa — but North Africa we need a stable environment.”

S&P Global Platts Analytics has taken a relatively cautious stance, pointing to a near-term easing of crude balances and forecasting a dip below $80/b come the New Year, even as demand is expected to rise by close to 5 million b/d on an annual basis this year and in 2022.

Normality returning
Speaking at the same event, Russell Hardy, CEO of trading company Vitol, also said a return to three-figure oil prices was possible, and echoed an emerging consensus that oil consumption is now back to — or nearly back to — pre-pandemic levels.

“So then when you begin to look forward into 2022, clearly demand is going to carry on increasing,” Hardy said. “Industrial growth is there… there are some headwinds but people are getting back to more normal patterns in their lives, both their personal transport and their international travel, so we’ve got a reasonably optimistic view of demand for next year.”

Crude oil futures were lower at midday in Europe, as the market responded to rising coronavirus infections and continued talk about a sale of crude from US strategic reserves.

At 1215 GMT, January ICE Brent futures were down $1.26/b at $80.91/b, while the December NYMEX WTI contract fell $1.08/b to $79.70/b.

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