A contrarian view on where the oil price is headed

The majority of those attending the various conference sessions of the Seatrade Offshore Marine Workboats Middle East event concurred that oil prices were likely to lie in the $50-60 range until at least the end of next year. Topaz Marine boss Rene Kofod-Olsen went further, predicting that they would likely lie in this range until the end of the decade.

However, Fazelboy has a number of arguments indicating that “lower for longer” could well prove wrong as far as oil prices go. First, he says, from a peak E&P spend of some $650bn in 2013, it rose by just 2% last year but will plunge by a likely 15% this year and probably 15-20% in 2016. Two, global oil reserves are being depleted by between 8-10% per annum – about 8m barrels per day (bpd) – and these cuts are having a serious impact on new finds.

Three, more than 250,000 jobs have already been lost, not just in E&P but also in the energy services sector, so there may be future pressure on human resources. And finally, it takes 3-5 years to bring a new offshore oilfield on stream, longer in certain areas where the “four d’s” apply – deeper, distant, difficult, dangerous.

Fazelboy does not hold truck with other sources filling the gap. US shale oil could reach 4-5m bpd, he concedes, and Iran might pump another 2m bpd within the next two years. But even combined, these would not be sufficient to make up a shortfall resulting from the cuts in E&P spending. Add to that economic growth in the US and Europe, and continuing demand increases in Asia.