Despite oil prices trading just above the $US40 ($57.60) a barrel mark, Italian supermajor Eni has joined BP in cutting its long-term price assumptions due to disruptions caused by the COVID-19 pandemic.

However, it remains somewhat more optimistic than its UK counterpart, reducing its assumptions for Brent crude from 2023 onwards to average about $US60 a barrel, down from its previous estimate of $US70 a barrel.

BP, meanwhile, drastically cut its long-term investment appraisal price by 27 per cent to just $US55 per barrel between 2021 and 2050.

Eni has also cut its gas price assumption at the Italian stock market in 2023 from $7.8 per million British thermal units to $5.5 million British thermal units.

Amid this reduction of its long-term price assumptions, Eni chief executive officer Claudio Descalzi says the company is sticking with its strategy of becoming a leader in the decarbonisation process.

“We are assessing how to speed up our plans. This ongoing evolution will allow the company to achieve a better balanced portfolio, reducing the exposure to the volatility of hydrocarbon prices, while progressing towards our targets of sustainability and profitability,” he added.

The company has already committed to an absolute emissions target of 80 per cent by 2050.


Melbourne lockdown spooks markets

Oil prices struggled to hold on to last week’s gains, which saw it rise above the $US40 per barrel mark.

While Chinese markets provided a boost, investors have also been spooked by Melbourne bringing back COVID-19 lockdown measures for another six weeks while parts of the US struggle with growing infection rates.

However, Citi believes that the Brent and West Texas Intermediate prices would average $US39 per barrel and $US37 per barrel respectively in the current quarter before rising to $US48 per barrel and $U45 per barrel in the fourth quarter.

The oil price has certainly been unkind to Australian oil and gas juniors with precious few escaping the bloodbath on the ASX over the past few months.


Australian refineries under threat

The collapse in fuel demand could threaten Australia’s ageing oil refineries, which are struggling to compete with Asia’s newer mega-refineries that are able to achieve greater economies of scale, process poorer quality crudes while producing more high-value products.

Reuters quoted Sushant Gupta, head of Asia Pacific downstream oil and gas research for Wood Mackenzie, as saying that when the global margin environment weakens and gets tougher, the threat of closure definitely increases.

To make it worse, the poor fuel demand could impact on decisions to upgrade the plants to produce gasoline with lower sulphur content from 2027.

MST Marquee analyst Mark Samter believes that if any refineries close, the most likely would be Exxon’s Altona facility in Victoria, the oldest of the four, and Ampol’s Lytton plant in Queensland, which is already shut for extended maintenance.

Any closure of Australian refineries is likely to alarm the government, which is concerned about supply security and has already started talks with the industry on how to support these refineries.