Skip to main content

Outlook for the oil market

Oilfield Technology,

Setting the tone
The opening presentation of the ERTC Annual Meeting confirmed the attitude that was held by almost all delegates at the event, which was made abundantly clear with the interactive questions that kicked proceedings off. The first question posed was ‘What is your mid term Brent oil price forecast?’ The unanimous results were ‘stay at US$ 115 /bbl’, and that came as no shock to Zsoldos or those around me at the presentation. The second question asked was ‘How do you think the European downstream outlook in 2018 will compare to now?’ and the unanimous answer read ‘somewhat worse.’

At the moment the European industry is of course being impacted by the events in the US, namely shale feedstock. ‘If you have the infrastructure, you have cheap gas’ said Zsoldos and that is one point that cannot be denied. The US has invested vast sums of money in their shale resources and Europe is yet to catch up.

The slowdown in liquids demand growth is also playing a big factor in the European oil market and globally. There is a noted slowdown in liquids demand growth in developed markets, and statistics presented by Zsoldos indicated that emerging markets are the only ones who will demand more liquid products, especially those that are non-OECD. And of course, the reason for the growing demands? Transportation. Transportation and vehicle ownership is on the up in emerging markets so their demand will increase, and this is the outlook that was projected to 2022.

‘Overcapacity as far as the eye can see,’ said Zsoldos when referring to the European refining industry. He didn’t boost positivity in the industry further when he stated that even with optimistic demand assumptions, overcapacity will persist and the overhang globally is likely to get worse not better over the next five years.

The fact that refineries are moving closer to resources or consumers also doesn’t help the refining industry in Europe. The cheap resources are currently in the USA and the demand in Europe is dropping, so there isn’t anywhere for the products to really go. The overcapacity figures are high.

Illustrated facts
At one point during the presentation a slide was displayed showing circles. Two circles were particularly enlightening, and they are facts I wish to share. One was placed over North America and the fact was, ‘there are more oil rigs inside this circle than out.’ The other circle was placed over Europe and whilst the circle is known for its cathedrals and red wine, there are more fuel taxes collected inside it than out. Two very surprising bits for information for me, and I’m sure for others too.

Silver lining
The projections, statistics and opinions presented by Zsoldos were not all full of doom. Middle distillates are going to be the saviour of the European refining industry. Diesel demand in emerging markets is on the up and Europe can help supply them. The US Army is also increasing its usage and there is possibly a niche for Europe there too. Zsolodos personally thinks that self driving cars and then self driving flying cars are going to be the key to future refining industry success as they will no doubt boost the middle distillate demand.

Concluding points
There is a depression still within the European refining industry, and sadly it is going to be around for a while. However, if the predictions and technologies of Zsolodos do come true, then in the not too distant future (hopefully) things will begin to bounce back with the help of diesel and middle distillates.

A few final quotes from Zsolodos to round things off;
‘Gas will be permanently cheaper than oil, and the adjustment has just started.’
‘The global refining glut will not ease in the next five years, unless closures accelerate.’

Written by Claira Lloyd

Read the article online at:


Embed article link: (copy the HTML code below):