By Robert Gibbons
NEW YORK, Oct 6 (Reuters) - Current oil prices are sufficient to keep industry capital expenditures steady or higher in 2011 with levels seen this year, Ed Morse, global head of commodities research at Credit Suisse, said on Wednesday.
Producers had already benefited from falling production costs, which he estimated were 30 percent below where they were before the financial crisis that hit in 2008, Morse said at a briefing of the Oil Council in New York.
While some in the industry believe that $75 to $80 a barrel oil is too low to keep exploration and production growth, Morse said: 'I'm not one of them.'
Morse said that production costs had fallen after the recession and added that projects estimated to need $55 a barrel crude or less were continuing to be funded.
Oil prices had been trading in a $70-$80 a barrel range for most of the past two months, before breaking over $80 a barrel in late September. Morse also said there had been surprising growth of non-OPEC oil production in the past two years.
The U.S. Energy Information Administration estimates non-OPEC production grew by in 710,000 barrels per day (bpd) in 2009 when U.S. oil pries averaged $61.66 a barrel. It forecasts growth of 700,000 bpd and an estimated average price of $77.37 a barrel in 2010.
IHS Herold this week said 2010 exploration and production spending was up 30 percent in the first half of the year.
Morse said that oil had found support from revived expectations of economic growth from No. 2 oil consumer China and also from the weaker dollar.
'Crude prices were in the doldrums about misleading indications of Chinese growth that we argued were based on seasonal factors and past policies,' said Morse, speaking at a briefing in New York hosted by the Oil Council, an industry organization.
He said the Federal Reserve's indications about acting to support a faltering economic growth with another round of quantitative easing, 'led to depreciation of the dollar and that led to a move into dollar-based commodities.'
Fundamental factors supportive for crude oil prices include refinery maintenance season and de-stocking of refined products inventories, Morse said.
Morse and other speakers at the briefing said that while U.S. deepwater exploration and production in the Gulf of Mexico would experience delays in the wake of the BP Deepwater Horizon accident, there had so far been less supply disruptions due to hurricanes in the Gulf of Mexico than initially expected.
Forecasters had called for the hurricane season, which runs from June until the end of November to be more active than average. While hurricanes can disrupt production and damage facilities in the Gulf of Mexico, drawing down crude inventories, the region has escaped serious damage so far this year.
(Reporting by Robert Gibbons; Editing by Lisa Shumaker)
((robert.gibbons@thomsonreuters.com; +1 646 223 6059; Reuters Messaging: robert.gibbons.reuters.com@reuters.net) Keywords: OIL CAPEX/CREDIT SUISSE
COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Oct 6 (Reuters) - Current oil prices are sufficient to keep industry capital expenditures steady or higher in 2011 with levels seen this year, Ed Morse, global head of commodities research at Credit Suisse, said on Wednesday.
Producers had already benefited from falling production costs, which he estimated were 30 percent below where they were before the financial crisis that hit in 2008, Morse said at a briefing of the Oil Council in New York.
While some in the industry believe that $75 to $80 a barrel oil is too low to keep exploration and production growth, Morse said: 'I'm not one of them.'
Morse said that production costs had fallen after the recession and added that projects estimated to need $55 a barrel crude or less were continuing to be funded.
Oil prices had been trading in a $70-$80 a barrel range for most of the past two months, before breaking over $80 a barrel in late September. Morse also said there had been surprising growth of non-OPEC oil production in the past two years.
The U.S. Energy Information Administration estimates non-OPEC production grew by in 710,000 barrels per day (bpd) in 2009 when U.S. oil pries averaged $61.66 a barrel. It forecasts growth of 700,000 bpd and an estimated average price of $77.37 a barrel in 2010.
IHS Herold this week said 2010 exploration and production spending was up 30 percent in the first half of the year.
Morse said that oil had found support from revived expectations of economic growth from No. 2 oil consumer China and also from the weaker dollar.
'Crude prices were in the doldrums about misleading indications of Chinese growth that we argued were based on seasonal factors and past policies,' said Morse, speaking at a briefing in New York hosted by the Oil Council, an industry organization.
He said the Federal Reserve's indications about acting to support a faltering economic growth with another round of quantitative easing, 'led to depreciation of the dollar and that led to a move into dollar-based commodities.'
Fundamental factors supportive for crude oil prices include refinery maintenance season and de-stocking of refined products inventories, Morse said.
Morse and other speakers at the briefing said that while U.S. deepwater exploration and production in the Gulf of Mexico would experience delays in the wake of the BP Deepwater Horizon accident, there had so far been less supply disruptions due to hurricanes in the Gulf of Mexico than initially expected.
Forecasters had called for the hurricane season, which runs from June until the end of November to be more active than average. While hurricanes can disrupt production and damage facilities in the Gulf of Mexico, drawing down crude inventories, the region has escaped serious damage so far this year.
(Reporting by Robert Gibbons; Editing by Lisa Shumaker)
((robert.gibbons@thomsonreuters.com; +1 646 223 6059; Reuters Messaging: robert.gibbons.reuters.com@reuters.net) Keywords: OIL CAPEX/CREDIT SUISSE
COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.