Oil executives say crude market volatility is here to stay

Chiefs including the Dana Gas head Patrick Allman-Ward gather at one of the oil industry's biggest conventions in Norway to discuss the current market situation and outlook.

Pump jacks are seen at an oilfield outside the West Siberian city of Kogalym, Russia. Oil executives are meeting to discuss the industry. Sergei Karpukhin / Reuters

Crude markets will continue to be plagued by volatility in the short and medium term after suffering the biggest downturn in a generation over the past two years, according to oil-company executives gathering for one of the industry’s biggest conferences in Norway.

Oil declined on Monday amid doubts producers will agree on a deal to stabilise the market when suppliers meet next month for informal talks. Iran’s plan to continue boosting crude output until it regains its pre-sanctions Opec market share is dimming prospects of collective action, according to Patrick Allman-Ward, the chief executive of Sharjah’s Dana Gas, at the ONS conference in Stavangar, Norway. A deal to freeze output was proposed in February, but a meeting in April ended with no final accord.

The ConocoPhillips chief executive Ryan Lance said volatility “is here to stay”. Market rebalancing “will extend into 2017. The inventory levels are still quite high”.

The industry remains on guard as oil entered a bull market August 18, less than three weeks after tumbling into a bear market. Prices have gained 19 per cent in the past four weeks on speculation Opec nations and other producers could agree to cap output at a meeting in Algeria next month. While markets are expected to rebalance as they gradually absorb a glut of crude stocks, analysts differ over the timing.

“Basically, volatility is the word,” said Martin Bachmann, the head of exploration and production in Europe and the Middle East at Wintershall. “There will be a rebalancing. Over what timeframe is the big question.”

It may take time for markets to strengthen and there will be great uncertainty in the meantime, said the Statoil chief executive Eldar Saetre.

Some industry observers are more optimistic. Daniel Yergin, the vice chairman of the consulting firm IHS, said oil supply and demand will balance this year, adding that spending on onshore oil and gas will increase in 2017.

“The rebalancing in the oil market is already happening,” according to Norway’s petroleum and energy Mminister Tord Lien. Still, “parts of the supplier industry will continue to have demanding months ahead”.

The oil market should achieve stability soon, the UAE Oil Minister Suhail Al Mazrouei said in a Twitter post on Sunday. Any decision to stabilise the market will require the full participation of all Opec members and major suppliers from outside the group, Mr Al Mazrouei said.

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