Demand for Oil, Gas to Remain Robust for Years, Energy Leaders Say

Source: By Collin Eaton and Christopher M. Matthews, Wall Street Journal • Posted: Tuesday, December 7, 2021

At the World Petroleum Congress, attendees were set to celebrate higher prices, but the new Covid-19 variant is affecting the mood

The 23rd World Petroleum Congress got under way this week in Houston. Photo: STAFF/REUTERS

The leaders of the world’s largest oil companies said Monday that demand for the products they make will remain robust for years to come even as the world attempts to transition to lower-carbon energy sources.

The chief executives of Exxon Mobil Corp. XOM 1.88% , Chevron Corp. CVX 1.72% and Saudi Arabian Oil Co., speaking at the World Petroleum Congress in Houston, said that while the world needs to address the risks posed by climate change, global economies cannot function without fossil fuels.

“Oil and gas continue to play a central role in meeting the world’s energy needs, and we play an essential role in delivering them in a lower carbon way,” Chevron CEO Mike Wirth said Monday. “Our products make the world run.”

The conference, one of the industry’s largest, is convening this week as the oil and gas business remains mired in uncertainty because of the pandemic.

The Omicron variant has weighed on oil prices in recent weeks and created headaches in international travel. On Monday, crude-oil prices gained nearly 5% as certain stocks and commodities rallied amid easing investor concerns about the Covid-19 variant.

The variant deterred some from attending the summit, including BP PLC CEO Bernard Looney. Canada’s minister of natural resources, Jonathan Wilkinson, also pulled out of the event, which a spokeswoman attributed to a scheduling conflict.

As of Friday, Qatar Energy Minister Saad Sherida al-Kaabi, who is also chief executive of QatarEnergy, was no longer listed as a participant in a Tuesday session. QatarEnergy didn’t respond to a request for comment.

Representatives for the 23rd World Petroleum Congress said it wasn’t uncommon for speakers to withdraw from such events at the last minute and that there were no plans to alter the event’s format.

“We are genuinely disappointed that Mr. Looney will not be available to speak at the 23rd World Petroleum Congress,” a conference spokesman said. “The Congress is designed for thought-provoking exchanges and an interactive exhibition that is best conducted in person.”

BP said David Lawler, the company’s U.S. head, will speak in Mr. Looney’s place.

Conference speakers seemed unfazed by the added uncertainty of the new variant. Jeff Miller, chief executive of Halliburton Co. HAL 4.01% , said Monday that the world’s underinvestment in oil and gas since 2014—years in which international spending was 50% below historical norms—is leading global markets to an era of scarcity.

“For the first time in a long time, you’re seeing a buyer looking for a barrel of oil, as opposed to a barrel of oil looking for a buyer,” Mr. Miller said

Just a few weeks ago, some market observers had predicted crude prices could soon hit $100 a barrel for the first time in seven years, on the back of a strengthening demand recovery and sluggish growth in oil supplies. Brent oil, the global benchmark, closed at $73.08 a barrel Monday, up $3.20.

“One-hundred-dollar-oil is still possible, but we’re still in it,” Ed Hirs, an energy fellow at the University of Houston, said of continued uncertainty. “Face it, it’s awfully volatile right now, and not on the supply side but on the demand side.”

Qatar Energy Minister Saad Sherida al-Kaabi, shown in September, was no longer listed as a participant in a Tuesday session of the World Petroleum Congress. Photo: Jon Gambrell/Associated Press

Scientists are still trying to pin down the health risks posed by Omicron, and projections vary widely on how the new strain will affect global oil demand. Consulting firm IHS Markit said Omicron will cut off only 100,000 barrels a day of jet fuel consumption, less than 1% of a global market that consumes around 99 million barrels daily.

Rystad Energy, another consulting firm, said the market might shed as much as 2.9 million barrels a day of demand in the first quarter, in a scenario that includes the possibility of lockdowns.

“I pray that we don’t have to put up with that,” said Kevin Foxx, chief executive of Houston-based pipeline and oil-storage operator Barcas LLC, referring to shutdowns that crushed oil demand last year.

Unless oil prices fall below $50 a barrel, U.S. shale producers are unlikely to stray from plans to boost capital spending next year by about 15% to 20% cumulatively, analysts said.

In 2021, oil producers spent the lowest amount of capital in the U.S. since 2004, according to investment bank Evercore ISI, meaning next year’s spending, even with the expected increase, will still be far below pre-pandemic levels.

Linhua Guan, chief executive of private Houston-based oil producer Surge Energy, said the new variant will probably give many companies second thoughts about dispatching more drilling rigs to oil fields next year.

“Anything can change,” Mr. Guan said. He noted his company doesn’t intend to alter its spending plans, which are more conservative than prior years.

Write to Collin Eaton at collin.eaton@wsj.com and Christopher M. Matthews at christopher.matthews@wsj.com