The Chief Executive Officer of Total, Patrick Pouyanne, said on the BFM Business radio station that he does not anticipate oil prices staying as high as $70 per barrel.
Pouyanne pointed out that it would likely take the global economy two years to bounce back fully from the COVID-19 pandemic. As oil demand for transport fuel and derived products like compressor oil is generally linked to economic activity, this will inevitably affect the oil markets. The CEO said about his expectations:
“I am not betting on prices staying at $70 a barrel, for me the right price is around $50-$60 a barrel.”
After a hard year for the industry, oil prices have generally been rising since the announcement of successful vaccines for COVID-19 towards the end of last year. A further boost was received when the OPEC+ recently surprised the markets by announcing that it would extend its current cuts – including Saudi Arabia’s voluntary extra cut of a million barrels per day – through to the end of April. Brent crude prices also briefly broke the $70 threshold on rumours of attacks on facilities in Saudi Arabia, before dropping back into the high 60s.
According to research from Wood Mackenzie, many international oil companies (IOCs) would be reasonably happy if Pouyanne’s prediction comes true. It says that thanks to massive cost-cutting and reduced capital spending plans lowering the breakeven point, IOCs can expect to see record cash flows should prices average $55 per barrel this year.