Exxon Mobil CEO Rex Tillerson expects the price of oil to remain low over the next two years because of ample global supplies and relatively weak economic growth.
“People need to kind of settle in for a while,” Tillerson said at the company’s annual investor conference in New York.
In a presentation to investors outlining its business plans through 2017, Irving-based Exxon assumes a price of $55 a barrel for global crude. That’s $5 below where Brent crude, the most important global benchmark, traded on Wednesday. And it’s about half of what Brent averaged between 2011 and the middle of last year.
The price of oil plunged in the second half of 2014 when it became apparent that production was outpacing global demand. U.S. output was particularly robust, with an increase of 1.5 million barrels a day — the third-largest on record — according to a report from BP. Meanwhile, weakening economic conditions in China, Japan and Europe slowed the growth in demand.
BP CEO Bob Dudley made remarks similar to Tillerson’s in a recent call with investors. The CEOs’ comments reflect an increasingly common industry view that new sources of oil worldwide, relatively slow growth in demand and large amounts of crude in storage will keep a lid on prices for the foreseeable future.
“When you have that much storage out there, it takes a long time to work that off,” Dudley said.
The Energy Department reported Wednesday that U.S. oil supplies have grown to 444.4 million barrels, the highest level in at least 80 years.
Tillerson cautioned that geopolitical turmoil could send prices higher unexpectedly. But he said that if tensions calm, much more oil is ready to hit the market.
Despite lower prices, Exxon Mobil is sticking to production targets established when oil traded for more than $100 a barrel, signaling confidence that demand for crude-based fuels will expand.
Exxon’s oil and natural gas output will grow by 2 percent this year and 3 percent in 2016 and in 2017, the company said in its presentation to investors and analysts.
Even with current prices, Exxon said, it can earn “attractive returns” with its onshore U.S. production.
To help provide a cushion for the low prices, Exxon sold $8 billion in debt Tuesday in its biggest bond offering ever. The largest portion was $1.75 billion in 10-year, 2.709 percent notes at a yield of 0.58 percentage point more than comparable Treasurys, according to data compiled by Bloomberg News.
Natural gas output will drop 2 percent annually this year and next before rising 4 percent in 2017, the company said. Exxon owns Fort Worth-based XTO Energy.
This report includes material from Bloomberg News.