Oil prices likely to remain low on continued oversupply: BK Namdeo, HPCL

In a chat with ET Now, BK Namdeo, Director - Refineries, HPCL, shares his outlook on oil in light of the crucial OPEC meet. Excerpts:

ET Now: What impact of today's OPEC meet do you see on crude and on companies like yours?

BK Namdeo: For a long time, crude prices have more or less remained in the range of $40-$50. The OPEC countries — especially Saudi — would never want their market share to be taken away by new players like shale gas and those like Venezuela, Mexico and Russia. That is why the OPEC players have gone in for overproduction.

As a consequence, surplus oil is drowning the market. Crude supply is much more than the demand. So, prices are bound to be lower. Only tighter supply can get oil prices to move up now.

Saudi Arabia is not going to cut down on their quota unconditionally. In case they have to have a cut, they will demand that others' quotas are cut too — even the quotas of non-OPEC players. Without an agreement on this, Saudi will continue to keep producing above their quota. So, markets will continue to remain oversupplied.

ET Now: Without rising demand, prices are unlikely to go any higher. Given the China contraction, don't you think that a spurt in short-term demand is unlikely?

BK Namdeo: You are right in saying that demand is not much likely to move up. Even if it rises, it would be at a very nominal rate. But as I have already said, no player is going to cut down on production. So, this oversupply will stay and so will low prices. In '16, it may go up a bit — to $50-$55.

ET Now: What are your views on the domestic oil scenario?

BK Namdeo: Indigenous production has not gone up to the expected levels. It has only shrunk, or at best remained at the same level.