Baku, Azerbaijan, Sept. 10
By Anvar Mammadov - Trend:
Fitch Ratings expects a growth in oil prices on the world markets in the light of decline in output in the US, the international rating agency's senior director, Maxim Edelson said in an exclusive interview with Trend.
"The decrease in oil prices is affected by several factors, the main of which being the large output of shale oil in the US," he said.
Edelson also said that over the past five years, the oil production in the US rose from 5.6-5.7 million to 9.2-9.3 million barrels per day.
"If considering that the members of OPEC [Organization of the Petroleum Exporting Countries] also increased output over the last five years, all this led to an oil oversupply in the market and a sharp drop in prices," he added.
The prime cost of shale oil production in the US is quite high ($50-$100 per barrel), therefore, part of the private oil companies has already left the market, according to Edelson.
For the present, this hasn't affected the production volumes, but it will affect in the next several years, he added.
Private producers are currently in a very difficult situation, since the flow of money they were historically receiving has dropped significantly, according to Edelson.
"But there are investors ready to finance these companies. This allows them to exist with current oil prices, albeit some of them are at the peak capacity, if not beyond it," he added.
But the oil production remains at the same level.
The issue of oil prices rests on an exact period and a level of their decline," he said. "We expect that the decline will occur and it will involve the oil quotes. Of course, all this will not happen immediately. There will be a temporary lag. But it must definitely happen because some US oil-producing companies are in a very difficult financial situation and in fact depend on the banks financing them."
In general, according to the expert, it should be stressed that the difficult situation is observed with shale oil.
In addition, a rather complicated situation arose regarding unconventional oil, which was also an important factor though not in the United States but Canada.
Great investments were made in the sands in Alberta province (West of Canada). Oil production volumes are falling there as well, as oil becomes unprofitable because of the high cost, he said.
"Throughout the world, expensive oil is generally at the level of survival," said the expert. "It is not only shale oil but also Arctic and offshore projects. The next two years will show whether these projects will survive, and how quickly the companies will abandon them. But if oil prices remain in line with our stress forecasts ($55 per barrel), the rejection of these projects can happen faster."