Page 27: of Marine Technology Magazine (April 2016)

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Bonga FPSO (Photo: Shell) stream players like Premier, Cobalt, others. ExxonMobil, for example, in March said it will budget $23.2 billion in capital spending in 2016 – down 25% from the $31.1 billion spend- ing in 2015 and 45% lower than the peak spending of $42.5 billion in 2013.

Over the past two months the picture has brightened a bit and some analysts (including this author) see a rebound be- ginning. By March 21, Brent had recovered to $41 -- and the futures market is pricing Brent at $44 at end 2016, $49 at end 2018 and $52 at end 2020. While higher than current spot, these futures prices are still far below the $100+ price of Brent just two years ago. But the trajectory in oil prices has been upward since hitting bottom in January and the futures market has the upward trend continuing.

While no one can predict the price of oil, we see the worse being over – and recovery underway. The world producers are Oil prices are volatile. But the long term trend is upward.

talking about a production freeze, drilling of new shale wells The huge inventory of oil in the market will limit near term in the US has stalled and – most important – global demand price increases and the ability of shale production to rapidly for oil keeps growing. Sooner or later supply and demand will ramp up will likely hold prices within the two digits over the come back into balance. While many things can disrupt and next few years. But we see prices getting back to $60 to delay this rebalancing (e.g., downturn in the Chinese econo- $70 by the end of the decade. We also see the potential for a my), we see a gradual recovery in oil prices over the next 6 to supply shock that could send the price of oil into three digits 12 months. This is not to say there will not be further dips. within this time frame. A supply disruption in the Middle East www.marinetechnologynews.com

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