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Page added on December 8, 2015
Chevron CEO: Oil prices will be higher in a year
Oil prices will likely climb in the next year as supply and demand in the market begin to even, Chevron CEO John Watson said Tuesday.
“We’ve got a slight imbalance in demand and it’s going to take some time to work that off,” he told CNBC’s “Power Lunch.”
Watson did not give a specific price projection for crude, but he noted the oil giant has prepared to “live with whatever prices the market gives.” He cited Chevron’s plan to cut capital spending by 25 percent in 2016, with further reductions expected in the following years.
Chevron shares have fallen more than 20 percent this year amid a prolonged stretch of lower oil prices, driven partly by an imbalance between production and consumption. Prices of WTI and Brent crude have each plunged nearly 40 percent this year.
“This is a very turbulent time in our business,” Watson said, noting the oil industry is “producing more than we need.”
In late October, Chevron reported diluted third-quarter earnings of $1.09 per share, down from $2.95 a share in the previous year. It joined other energy companies in outlining broad cost-trimming in the coming years, including cutting 6,000 to 7,000 jobs.
Watson believes the sector’s capital spending rollback will eventually lead to production falling. He stressed that expense cuts will not affect Chevron’s ability to pay its divided, which he called the “No. 1 priority.”
The latest hit to oil prices came on Monday, when U.S. crude futures plunged nearly 6 percent after Friday’s meeting of OPEC. The cartel failed to agree to a production ceiling.
Collective action to curb output by OPEC seems “unlikely,” Watson contended.
Oil prices will likely climb in the next year as supply and demand in the market begin to even, Chevron CEO John Watson said Tuesday.
“We’ve got a slight imbalance in demand and it’s going to take some time to work that off,” he told CNBC’s “Power Lunch.”
Watson did not give a specific price projection for crude, but he noted the oil giant has prepared to “live with whatever prices the market gives.” He cited Chevron’s plan to cut capital spending by 25 percent in 2016, with further reductions expected in the following years.
Chevron shares have fallen more than 20 percent this year amid a prolonged stretch of lower oil prices, driven partly by an imbalance between production and consumption. Prices of WTI and Brent crude have each plunged nearly 40 percent this year.
“This is a very turbulent time in our business,” Watson said, noting the oil industry is “producing more than we need.”
In late October, Chevron reported diluted third-quarter earnings of $1.09 per share, down from $2.95 a share in the previous year. It joined other energy companies in outlining broad cost-trimming in the coming years, including cutting 6,000 to 7,000 jobs.
Watson believes the sector’s capital spending rollback will eventually lead to production falling. He stressed that expense cuts will not affect Chevron’s ability to pay its divided, which he called the “No. 1 priority.”
The latest hit to oil prices came on Monday, when U.S. crude futures plunged nearly 6 percent after Friday’s meeting of OPEC. The cartel failed to agree to a production ceiling.
Collective action to curb output by OPEC seems “unlikely,” Watson contended.
20 Comments on "Chevron CEO: Oil prices will be higher in a year"
twocats on Tue, 8th Dec 2015 7:22 pm
Ummm, useless. The global economy is splitting apart at the seams and this guy is talking about a dividend. Peak oil is important no doubt, but the Fed is on the verge of a rate hike, or will just have to reverse course entirely and launch QE and negative interest rates. Finland has suddenly become one of the more interesting places to watch. If they launch helicopter money and it works, I expect a check to arrive to ole’ Twocats soon enough!
makati1 on Tue, 8th Dec 2015 7:41 pm
More, CNBC enabled, pimping bullshit from the dying oil industry.
Johny de Vito on Tue, 8th Dec 2015 10:34 pm
Price increase is a wishful thing.
Not politically correct to say that dividend is the number 1 priority…too honest…cut jobs to pay dividend that is the message he is delivering.
Outcast_Searcher on Wed, 9th Dec 2015 12:41 am
Johny, it’s “wishful thinking”, not “a wishful thing”. Did you write any papers in school? Did anyone correct them?
He said nothing about cutting jobs, but congratulations for making stuff up. He DID cite significant capital spending reduction (long term supply decreases) going forward.
I guess just posting random stuff works well in the echo chamber?
charmcitysking on Wed, 9th Dec 2015 5:05 am
Outcast,
“In late October, Chevron reported diluted third-quarter earnings of $1.09 per share, down from $2.95 a share in the previous year. It joined other energy companies in outlining broad cost-trimming in the coming years, including cutting 6,000 to 7,000 jobs.”
Did you read any papers in school? Did anyone quiz you?
rockman on Wed, 9th Dec 2015 5:59 am
Anyone can predict the price of oil in the next 12 months. But I know of no one that accurately do so. IOW did Eric predict the current oil price 12 months ago? If he did then I might have to modify my statement. LOL
rockz on Wed, 9th Dec 2015 8:13 am
The Chevron guys usually get it right. They have a very extensive intelligence community and their shareholders hold them accountable. His words are chosen carefully.
Why will prices go up? Third grade math for one. Companies cannot produce oil below costs. Demand is rising because there are new customers every day and a few more billion behind them. Reserves are naturally depleting, finding technologies (like 3-D) are just buzz words with no better results than 50 years ago. Finance capitol is scared of energy because there is no price stability. Cheap oil is like a drug that always goes up, and one day it will not come down. Lastly, contrary to solar and wind believers, the world will go back to the stone age if we do not have oil, because you cannot build solar or capture wind without oil. Look for the bottom of the market and pick some well financed companies. For higher risk, pick the few Energy companies that have new era technologies that will identify and implement reserves for costs far below others. They will be financed first.
shortonoil on Wed, 9th Dec 2015 9:25 am
With WTI at $37 dollars some wells with high water cuts (>90%) are no longer covering their lifting cost. If the present price structure persists for an extended period they will be shut in, and most likely never restarted. The price will never again rebound enough to make that feasible:
http://www.thehillsgroup.org/depletion2_022.htm
We put the above page up over 18 months ago, and began informing people of the coming price decline in May of 2014. The price began to descend in July of last year. The present decline is the result of the ongoing depletion of the world’s petroleum reserves. That, of course, will continue to manifest itself with declining prices, and abandoned operations.
The increasing difficulty of extracting petroleum, and producing its products is making it less attractive as an energy source for the general economy. That results in a downward pressure on its price. Because petroleum is a primary contributor to the economy when operations are phased out the economy contracts. Operators will cease production when their debt load becomes unmanageable. As the price declines, their primary asset which is their reserves, will also decline in value. That will make their debt management ever more difficult until it becomes impossible.
By 2020 our projections indicate that the industry will be in serious crisis. Although this present price decline is viewed by many as just another decline in an industry that has historically been plagued with such declines, it is not. The multi-year ramping of world inventories in conjunction with increasing price is strong indication that something is very different with this decline in comparison to previous ones. The present decline is resulting from depletion effects. Attempting to ignore the inevitable result of the depletion process will in no way change its outcome!
http://www.thehillsgroup.org/
rockman on Wed, 9th Dec 2015 10:19 am
“The Chevron guys usually get it right. They have a very extensive intelligence community and their shareholders hold them accountable. His words are chosen carefully.” Then why aren’t we seeing Chevron posting $billions in revenue from the hedges they bought last year if they had predicted the oil price collapse? For instance PEMEX just got a $7 BILLION check from Goldman for the hedges they had put in place.
Or more specifically show me where Chevron, 12 months ago, had predicted prices anywhere close to where they are now. Then I’ll be glad to give them a pat on the back. LOL.
shortonoil on Wed, 9th Dec 2015 1:17 pm
No one predicted $37 oil a year ago, including us. The reason is that no one knew what he impact of Central Bank policies would be; including the the CBs. They have moved vast amounts of liquidity into the market that had no place to go. There were no investments that could give a reasonable return on the volume of currency they poured into the economy. Some of those funds went into speculative investments, including oil. Shale was kept alive for another day, and the price collapsed far below our curve.
The oil exporting nations are now seeing their currencies collapse with the price of oil. To make up for the declining price everyone is producing at their maximum capacity:
http://www.zerohedge.com/news/2015-12-08/oil-producers-currencies-are-collapsing-brent-breaks-below-40
Because much of their debt is priced in dollars they are left between the hammer and the anvil. They will soon have to tap into their sovereign wealth funds that are heavily denominated in US Treasuries; but the US doesn’t actually have the money to redeem those bonds. So the FED will print again, and more liquidity will flow into the economy that has no place to go. Some of it will go back into oil, and the price will fall some more; rinse, repeat.
It will stop when producers can no longer recover their lifting costs. Producers will shut their doors, production will fall, and the economy will decline. Everyone will be dismayed, unless their live on Wall Street.
http://www.thehillsgroup.org/
GregT on Wed, 9th Dec 2015 1:26 pm
“So the FED will print again, and more liquidity will flow into the economy that has no place to go. ”
There are other options Short……
Negative interest rates an option in Canada, Stephen Poloz says
“Canada could theoretically follow the lead of other countries that have recently gone to negative interest rates in order to stimulate the economy, central bank governor Stephen Poloz told a business audience today after yet another drop in the loony.”
“Speaking to the Empire Club in Toronto, Poloz said moving its benchmark interest rates below zero is something in the Bank of Canada’s monetary policy toolkit that the bank may consider down the line.”
http://www.cbc.ca/news/business/stephen-poloz-monetary-policy-1.3355704
What recession? Our economies have never looked better.
rockman on Wed, 9th Dec 2015 1:31 pm
shorty – “The reason is that no one knew what he impact of Central Bank policies would be; including the CBs.” Exactly the point some of us keep making: the price of oil hinges on a lot more then the amount of production OPEC or anyone else can supply. Not dependent on the number of rigs drilling US shales. Not solely dependent upon who is killing who in the ME at the moment.
Some folks still don’t like the POD because they feel it’s too inclusive. But if one isn’t looking at all the various factors simultaneously it’s going to be very difficult to grasp where we’re heading at any one moment in time.
MrNoItAll on Wed, 9th Dec 2015 1:38 pm
Baghdad Bob: Iraqi army will destroy EVIL American invaders.
Right on par with Chevron CEO pronouncement in this article.
The last decade leading up until today has been ALL about buying time, while high level behind-the-scenes but still obvious preparations are made for inevitable collapse.
They bought some time. But that bought time has been all used up. There isn’t any more meaningful amount of time to buy.
A year ago and two years ago I was predicting that 2015 would be THE year that the global economy collapsed. Looks like I was wrong. The global economy is still hanging by a thread as commodities and GDP across the board collapse while the money printing machines are in overdrive, but still the machine creaks forward.
At least my belief in 2015 being THE year that TSHTF motivated me to get ready. So here I sit, stocked up with food and all kinds of preps, very close to fully self-sustainable. And probably just in the nick of time. I hope anyone reading this can say the same.
shortonoil on Wed, 9th Dec 2015 5:07 pm
“There are other options Short……
Negative interest rates an option in Canada, Stephen Poloz says”
I took a few economics courses a long, long time ago. They were the courses that engineers took to get an easy A; boost the accum to get into grad school. I have probably forgotten some of it over time, but I’ll be damned if I can remember anything about negative interest rates. Interest was the metric used to measure the time rate of change for the value of money. If some quantity of money X represents the value of society, and interest rates are going to go negative, wouldn’t that imply that the world is getting poorer? I don’t think that Mr. Krugman is being totally honest with us!
GregT on Wed, 9th Dec 2015 5:42 pm
“wouldn’t that imply that the world is getting poorer”
Using the logic of a few of the posters here, that would mean that our economies are doing so well, that we can all afford to pay the banks to keep our money safe for us!
antaris on Wed, 9th Dec 2015 5:59 pm
You better all get your money out doing something, else if you leave it my bank I’m going to charge you rent.
shortonoil on Wed, 9th Dec 2015 6:50 pm
“You better all get your money out doing something, else if you leave it my bank I’m going to charge you rent.”
The Egyptians had a system like that. It was based on wheat which was the backing for their currency. The farmers after harvest would take their wheat to the Pharaohs graineries, and they would then be given a number of chits depending on how much wheat they deposited. The chits were then used as currency. At the end of the season the farmer would be given new chits for the ones not spent during the year. He would be given less than the number he still retained. That was the Pharaohs charge for wastage, and storing the grain. Everyone tried to spend all of their chits before the end of the season. Their economy boomed. Egyptians ran around building all kinds of things in order to spend their chits. They even wound up building the pyramids. The largest structures ever built in the ancient world for the wrong reason. As a secret tomb they didn’t work very well, grave robbers had a tendency to notice them!
Washington DC should adept to the negative interest rate idea quit well.
antaris on Wed, 9th Dec 2015 6:59 pm
Yes it must have been tough back then.
Imagine trying to stuff wheat under a mattress.These days over in Europe I hear, stuffing Euros under the mattress is much easier.
makati1 on Wed, 9th Dec 2015 7:45 pm
antaris, hopefully, they are stuffing gold or another currency under those mattresses. I don’t see the Euro lasting much longer. Can you imagine the Italians taking the beating that Brussels is giving Greece at the moment? Or France? I see revolt and collapse of the EU in the next few years.
Kenz300 on Thu, 10th Dec 2015 7:33 am
Fossil fuel companies need to embrace change….
If It Owns a Well or a Mine, It’s Probably in Trouble
http://www.nytimes.com/2015/12/09/business/anglo-american-to-cut-85000-jobs-amid-commodity-slump.html?emc=edit_th_20151209&nl=todaysheadlines&nlid=21372621&_r=0