According to the CEOs of the world's top energy giants, oil prices will stay high because of production constraints.
Second-quarter earnings reports have already shown record hauls for the sector, and that should sustain massive profits. Although oil prices have fallen in the last few months due to recession fears, crude staged a rally over the last week and is still up more than 30% for the year.
Ben van Beurden, chief executive of Shell, said in an interview that there is more upside to the oil price. Supply is tight and demand hasn't fully recovered.
While Western sanctions on Russian oil have yet to kick in, he noted that there is limited capacity for additional oil production by the Organization of the Petroleum Exporting Countries. Another 2.2 million barrels will be removed from the market by the end of the year as a result of the European Union partial embargo.
Patrick Pouyanne said Thursday that global markets will struggle to develop spare production capacity for oil and natural gas in the next year.
Medium term support for high prices is implied by this.
As he looked at the oil price outlook on Friday, Exxon Mobil CEODarren Woods pointed to production constraints.
He told CNBC that it would take about three to five years for investments to translate to additional supply. There are no signs that demand for fuel is going to be destroyed.
To lower prices, the industry needs to invest more. Wood said on the call that it would take time.
Ryan Lance, CEO of ConocoPhillips, told an industry group earlier this month that US producers are limited in how much oil they can produce.
He said that demand will return to pre-pandemic levels eventually. There is going to be a shortage.
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