$100 oil seen years away by Petronas as shale output resilient

SHARON CHO and ANN KOH

KUALA LUMPUR, Malaysia (Bloomberg) -- The rally in crude prices may not last as U.S. shale output remains robust, according to Malaysia’s state oil company.

“It will take many years until we see oil prices anywhere near the $100 mark,” Petroliam Nasional Bhd. President and CEO Wan Zulkiflee Wan Ariffin said at a conference in Kuala Lumpur on Monday. “We’ve underestimated the resilience of U.S. shale production. We’re still grappling our way to climb out of this big drop.”

Oil tumbled almost 50% in 2014 as expanding U.S. stockpiles and production exacerbated a global supply glut. While prices have rebounded from a six-year low in March, analysts from Goldman Sachs Group Inc. to Societe Generale SA are predicting the rally won’t last as the surplus persists. OPEC may further boost output amid a battle for market share, according to the International Energy Agency.

“The outlook is not very rosy,” said Wan Zulkiflee, who became CEO of the company known as Petronas on April 1. “The sector is going through a downturn. It’s among the most dramatic after the slump caused by 2008-2009 recession.”

West Texas Intermediate for June delivery, which expires Tuesday, rose $1.19 to $60.88/bbl in electronic trading on the New York Mercantile Exchange at 3:25 p.m. Singapore time. The more-active July contract added $1.13 to $61.67. Prices, which were last above $100 in July 2014, have increased 14% this year.

U.S. Supplies

U.S. crude inventories shrank for a second week to 484.8 MMbbl in the period to May 8, a level that’s more than 100 MMbbl above the five-year seasonal average, according to government data. While the world’s largest consumer is pumping oil at a reduced pace as drillers cut the number of active rigs, output remains near a record.

Slowing U.S. production is drawing attention from rising global stockpiles and prices are likely to slip before the end of the quarter, Societe Generale said this month. The recent rally is premature as the market remains “well oversupplied” in 2015 despite the perception of improving fundamentals, Goldman said in a May 11 report.

The Organization of Petroleum Exporting Countries, which supplies 40% of the world’s crude, is scheduled to meet June 5 in Vienna. Saudi Arabia led a decision in November to maintain collective quotas at 30 MMbopd, and the group has pumped above that target for the past 11 months, according to a Bloomberg survey of companies and analysts. OPEC’s push to defend its share of the global oil market has just begun, the IEA said in its monthly report May 13.