Paris — Current strength in oil prices could lead to a slight fall in demand, Total CEO Patrick Pouyanne said Thursday, adding the oil market remained uncertain and volatile despite stronger fundamentals.
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Pouyanne, speaking at the International Oil Summit in Paris, also said an oil price around $50-$60/b were more preferable to a company like Total as it made the oil major "super-efficient".
Total can compete better than its peers at those price levels, he said, adding that was another reason why "I do not want more than $60/b but if it goes higher, I will take it".
ICE Brent crude futures rose to over $73/b Wednesday, the highest since November 2014 amid rising geopolitical tensions in Middle East and between the West and Russia.
Pouyanne said those higher prices could hit oil demand growth.
"Do not underestimate the higher price impact on demand...the outlook remains uncertain despite higher prices and a tighter market," he said, adding the oil industry should be a "little bit careful" on wanting higher prices as the main characteristics of the current market was volatility.
According to recent reports, Saudi Arabia has said it would be happy to see crude rise to $80/b or even $100/b, and will not seek to alter the current OPEC-led production deal, which has further supported oil prices.
"I do not think there is a stable price. It is quite clear that there is a shift in market. A big driver of demand was low prices. That is a lesson and we should not forget that," Pouyanne said.
Pouyanne also said the industry needed to be vigilant on the elasticity of oil demand growth and the decision by the International Maritime Organization to lower sulfur levels is likely to weigh on oil demand.
"Around 2 million b/d of high sulfur residue fuel oil will have to find a home. And 1 million b/d of gasoil and low sulfur fuel oil and vacuum gasoil could be absorbed in the bunker fuel market," he said. "This will have an impact on the market. Demand will be under pressure."
PLAYING TO STRENGTHS
Total has fared well since the oil price crash that started mid-2014 compared with some of its competitors, and Pouyanne said one reason was the strength of its downstream sector along with its cost discipline.
Pouyanne said Total will stick to its strengths, which involves investing in oil and gas plays that are big and have low operating costs.
He said it will continue to invest in the Middle East and North Africa despite those being risk-prone frontiers as "this is where you find the most competitive barrels".
Total remained committed to deepwater as could be seen through its assets in Angola, Brazil and the Gulf of Mexico, he said.
On the subject of US oil output, Pouyanne expected it to rise further in 2018, adding the rise in tight oil output was also causing a rise in non-associated gas "which could begin to impact the economics of this play".