Royal Bank of Scotland warned that investors expecting the imminent return of China-fuelled oil price rises will be disappointed and that the supply side rather than demand will dominate the oil story in the coming decade.
RBS is still predicting a strong rebound in earnings from the titans of oil, thanks to moderately higher oil prices, however. But Iraq could change the picture entirely. The bank said: “We believe recent news flow from Iraq threatens a paradigm shift in oil markets that could cap oil price expectations and earnings forecasts in the medium term.”
Increases in output from Iraq are likely to be modest until 2013 leaving scope for shares in the sector to rise. But Iraq fears could begin building among investors this year, with the company strategy presentations approaching and the conclusion of Iraq's parliamentary elections in March likely to highlight the potential increase in oil supply.
Well, if you'd been reading this blog, you'd be well informed on both sets of issues :-)
I haven't fully made up my mind here. In particular, I don't yet understand why global oil production has been recovering so fast in the second half of 2009. However, it does seem to me that there is potential for both of the stories above to be true in sequence - there may be enough time for another oil price spike due to OPEC spare capacity getting used up, before an Iraq induced price fall if the al-Shahristani plan succeeds on something like the intended scale.
HOUSTON (Dow Jones)--Schlumberger Ltd. (SLB) Chief Executive Andrew Gould said that he expects an increase in service activity in Iraq.
"I don't think it will have a material effect on results in 2010, but it may, we may well start to see the ramp-up in the second half of the year," Gould said in a conference call to discuss the company's fourth-quarter earnings.
Gould noted that there is the potential for a "huge amount of service activity" in Iraq over the next two to three years.
"huge amount of service activity" - no shit.