Published Date : Oct 07, 2015
Ben van Beurden, chief executive of Shell stated that though oil prices are dropping, they could soon start to recover and spike up. He further stated that the four things to look out for in case of short-term oil prices are the behaviour of the Organisation of the Petroleum Exporting Countries (Opec), the US shale industry, global demand for oil, and cost of production.
He further added that global demand for oil is giving mixed cues while Saudi Arabia, one of Opec’s largest oil producer seems to be relenting on the policy to maintain the same production to keep its market share.
On the other hand, the shale producers in the U.S. have been resilient, but are struggling to raise finances. Furthermore, the cost of production in the overall industry has dropped since end of 2014, which will help the profit margin as the industry tries to get back on its feet.
Reports have indicated that oil prices have plummeted in the past year due to oversupply. Van Beurden stated that though there are signs of recovery the U.S. shale oil aspect is being very strong with huge lots in stock, making it difficult to restore the balance between demand and supply.
He further added that the next challenge of the oil prices to gain balance will be Saudi Arabia’s take on Opec. If their understanding tries to seek a balance, oil prices will recover. However, the time taken to make this recovery remains rather uncertain.