After a tumultuous week, oil prices were on the rise late morning Friday, Nov. 17,
Global benchmark Brent crude futures gained 1.12% to $62.05, while WTI crude increased 1.74% to $56.10 Friday for a three-day high.
Prices were increasing heartily, but were still on track to fall between 2% and 3% from the end of last week. Friday's steady gains, though, were a welcome sign that a rebound from a rough week could be on the way.
In an earnings call Oct. 20, Schlumberger Ltd. (SLB) - Get Report offered insight regarding what it predicted would push oil prices higher. Here's what company executives said might precipitate an increase in prices.
- Investment appetite in North America has slowed some as a result of upstream companies pivoting to focus on financial returns instead of production growth. For many of them, operating within the limits of cash flow has become more important. That could result in slightly smaller production levels moving forward.
- Schlumberger management noted an increasing likely possibility of an extension to existing production cuts out of OPEC and Russia. OPEC, Russia and other oil-producing nations are now working toward a consensus agreement that would extend production cuts another nine months. While Russia's agreement to a deal is somewhat uncertain, OPEC is set to meet Nov. 30 to discuss extension.
- Schlumberger said particularly low investment into production in regions outside of North America, the Persian Gulf and Russia were "raising the likelihood of a medium-term global supply challenge, and increasing the urgency for higher investment." Short-term production cuts paired with medium-term global supply issues could contribute to a higher per barrel price tag for crude oil.
- CEO Paal Kibsgaard also noted that oil prices have historically benefited from a "geopolitical risk premium," but that factor had of late been replaced by an "oversupply discount." Now, though, the supply/demand dynamic could be thrown into question and rising global political tension abounds, especially in major oil-producing nations. That means the risk premium could be on its way back, and prices could jump with it.
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