BAKU, Azerbaijan, Feb.23
By Leman Zeynalova – Trend:
Oil prices may see $80 a barrel in summer or before year-end and above $100 a barrel in the next 18 to 24 months, Trend quoted Hayal Ahmadzada, SOCAR’s chief trading officer, as saying.
He told WorldOil that the glut of excess oil stocks that built up in 2020 in response to the pandemic will be fully drawn down by the summer. “At the same time, soaring prices for steel used in pipes, wells and fittings as well as the high cost of capital for producers will crimp a meaningful supply response by an already hobbled industry even as demand returns.”
Ahmadzada said SOCAR had already sold all of the oil it stored during the crisis, as much as 15 million barrels.
He pointed out that soaring steel prices means oil services contractors will struggle to build pipes, wells and other infrastructure needed to bring back production on time and on budget. That will slow the supply response even as demand returns as countries emerge from lockdowns and other restrictions.
“We may see a shake-out in that industry, due to very high steel prices,” he said.
Ahmadzada added he expects the OPEC and its allies to taper production cuts and return to pumping crude at full tilt soon. Even so, it won’t be enough, he said.
Even with Saudi Arabia and Texas producing, “the fear is that in 12 months there will be a shortage,” he said. “It will drive the price very high very fast.”
Ahmadzada said the unprecedented oil price collapse in April 2020 and the shuttering this month of more than a third of U.S. production because of freezing weather, has ushered in a new era of market disruption that he expects to continue.
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