DNB: Sub-$100 a Barrel Oil May Translate into Long Term Demand Growth
Norway’s leading investment bank DNB ASA projects crude oil price will continue trading at below $100 a barrel level, with the price weakness potentially weighing on offshore and unconventional oil and gas exploration and production (E&P) activity globally.
Over two thirds of the oil firms surveyed by DNB Markets in August have signaled their intent to decrease or maintain E&P spending from 2015 to 2016, the Norwegian firm’s Credit Research analyst Mikael Gjerding said in a briefing held in Singapore last week.
The survey had indicated “flattish” offshore E&P expenditure of $105 barrel oil in August but with oil price trending at just above $80 a barrel, the petroleum industry should see “further [E&P] reduction and more negative momentum,” Gjerding warned.
Potential Supply Glut May Hurt Service Providers, Including Rig Firms
The DNB analyst also cautioned against a developing supply glut that will further swing the market against the favor of oilfield services provider.
The offshore rig market is a prime example with “a lot of supply” entering the market from “2014 through 2016 and to some extent 2017,” Gjerding explained.
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