Oil market rebalancing sooner, price heading towards $60: Statoil CEO

Statoil CEO Eldar Saetre says the oil market should rebalance in early 2017 and oil prices should rise to $60/barrel. Statoil photo by Ole Jørgen Bratland.

Oil market shift due to OPEC output cuts

OSLO, Dec 6 (Reuters) – The balance between demand and supply in the oil market will shift earlier than previously expected due to OPEC’s output cuts, with prices heading towards $60 a barrel next year, Statoil‘s chief executive said on Tuesday.

Brent crude futures hit $55 a barrel on Monday, the highest level since July 2015, after OPEC agreed on Dec. 1 to curb production by 1.2 million barrels per day (b/d) from January.

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“It means that the rebalancing of the market can come at an earlier point in time than we previously expected,” Statoil chief Eldar Saetre told Reuters on the sidelines of an energy conference.

“We basically have indicated that the rebalancing will start at some point during 2017. I think this (OPEC agreement) will push it to the front of 2017 as this agreement comes into effect,” he added.

As a result of demand catching up with supply, oil prices are expected to rise to towards $60 a barrel, spurring more oil production from U.S. shale.

“There will be volatility, and at some point we will see higher prices driven by lack of investments,” Saetre said, adding that increased output from the U.S. will not be enough to compensate for historically low global investments.

“At some point we will see higher prices (than $60 a barrel)… because of deferred investments, but I don’t think you will see the impact of this next year, because the time horizon is longer,” Saetre said.

(Reporting by Nerijus Adomaitis and Stine Jacobsen, writing by Ole Petter Skonnord, editing by Terje Solsvik)