Shell forecasts oil price recovery to $90 by 2020

Royal Dutch Shell expects oil prices to gradually pick up over the next five years, with progress slowed by global oversupply and receding Chinese demand growth.

The Anglo-Dutch energy giant is betting on crude rising to $90 a barrel by 2020, a key assumption in its move to buy rival BG Group for $70bn to help transform it into a leading player in the costly deep water oil production and liquefied natural gas markets.

“We are not banking on an oil price recovery overnight. It will take several years but we do believe fundamentals will return,” said Andy Brown, upstream international director at Shell, who oversees oil and gas production outside North America.

“Until such time, we, like other companies, will have to make sure we stay robust,” he added, referring to deep spending cuts taken by oil companies in recent months in the face of a near-halving of oil prices since June last year. A rise in global supplies, mainly due to a sharp increase in output from US shale, has weighed on oil prices.

In the nearer term, Shell expects Brent crude oil to show only a modest recovery from the current $58 a barrel, with 2016 prices forecast to average $67 a barrel and $75 a barrel in 2017 — based on the company’s BG offer.

Reuters