Markets are essentially balanced, but it may not become apparent until stocks drain
After two years of low oil prices caused by global oversupply, markets have found balance, according to BP (ticker: BP) CEO Bob Dudley.
“The oil market is pretty much in balance,” Dudley said on the sidelines of the World Energy Conference in Istanbul. “[We’re] within half a million barrels one way or the other, but the stocks are so high, you really won’t be able to tell until they slowly drain and sentiment changes.”
Low prices have encouraged oil and gas producers like BP to lower their costs significantly in the last two years. Dudley said BP is currently looking to lower its cost of production on a per-barrel basis below $55.
“We [expected a cost of] $60 [per barrel] next year; we are under $55 now. We can see our way to $53 next year.”
“We are going to work hard make these sustainable, so that we don’t have to rely on swings in prices that are volatile and not healthy for industries and consumers and markets.”
Comments made by Russian President Vladimir Putin about supporting an OPEC production freeze or cut at the same conference sent oil prices up today, but Dudley appeared to remain cautiously optimistic about future prices.
“As an oil company that’s not a part of OPEC, we’re not going to rely on that or depend on that. We’re still going to adjust.” The fact that OPEC countries are cooperating with one another is a good sign for markets though, he said.
“I will note that countries that traditionally don’t have good relations actually made some understanding and agreement [in Algeria],” he said.
“It is just the fact that people are talking and there is cooperation is very significant.”
