Pic: Yuichiro Chino / Moment via Getty Images
The long-term outlook for oil is grim, with one heavyweight betting on a lower price
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Oil price bulls are likely to be disappointed with UK supermajor BP cutting its long-term investment appraisal price by 27 per cent to an average of just $US55 ($80) per barrel between 2021 and 2050.
The company explained early this week that this was due to the lingering impact of the COVID-19 pandemic on oil consumption and a growing expectation that the aftermath will see an accelerated transition to a lower carbon economy.
BP also recognised that prices above $US60 per barrel were not sustainable for long as it would encourage too much production, particularly from US shale oil producers, which would outstrip consumption growth.
READ: There is still room for oil prices to rise, or is there?
This forecast comes at the same time OPEC envisages that while global oil demand will start to recover in the second half of the year, it will still be down by 6.4 million barrels per day (MMbpd) in the second half from the same period last year.
It added that oil demand declined by an estimated 11.9MMbpd in the first half of 2020.
“Transportation fuels are forecast to remain under pressure in 2H20, despite ongoing easing in lockdown measures. Aviation fuel is expected to continue facing challenges, as national and international flights are anticipated to only slowly recover, while teleworking/teleconferencing restricting business travel,” OPEC noted.
The International Energy Agency also believes that oil demand will not recover to pre-pandemic levels until 2022 at the earliest.
It noted that forecast consumption in 2021 would be 97.4MMbpd, about 2.4MMbpd below 2019 levels.
The West Texas Intermediate benchmark is currently trading at $US37.51 per barrel while the broader Brent crude is at $US40.54 per barrel.
ASX small cap oil and gas companies
Triangle Energy (ASX:TEG) has shut-in its Cliff Head 6 and Cliff Head 7 oil wells after bringing forward the planned work program for the 2021 financial year.
Cliff Head 7 was shut-in during routine operational maintenance to enable testing of the integrity of the lower completion part of the well and allow a forward remediation plan to be approved and implemented.
Options are been evaluated for the well to return to production at the earliest opportunity.
The company is also investigating the cause of an electrical submersible pump failure at the Cliff Head 6 well.
It expects production from the remaining wells at the Cliff Head field to stabilise at about 590 barrels per day.
Meanwhile, 88 Energy (ASX:88E) says its recommended takeover offer for XCD Energy (ASX:XCD) is now unconditional after it secured acceptances for 59.27 per cent of XCD’s shares.
88 Energy is offering XCD shareholders 2.4 88E shares for every XCD share they own and 0.7 88E shares for every XCD listed option.
The combined company will have a diversified portfolio of three oil projects in Alaska’s highly prospective North Slope province.
Armour Energy (ASX:AJQ) is selling its 10 per cent interest in the Murrungama block in Queensland’s Surat Basin to east coast liquefied natural gas producer Australia Pacific LNG.
The company said the sale will allow it to focus on its wholly-owned and operated assets.
