NEW YORK (AP) — 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 kinda 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, 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. 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. The rise in U.S. production last year of 1.5 million barrels per day was the third largest in the history of the global oil industry, according to a recent report from BP. Meanwhile, weakening economic conditions in China, Japan and Europe slowed the growth in oil 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 around the globe, 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 U.S. Energy Department reported Wednesday that U.S. oil supplies have grown to 444.4 million barrels, the highest level at least 80 years.
Tillerson cautioned that geopolitical turmoil could unexpectedly send prices higher. But he said that if tensions calm, much more oil is ready to hit the market.
Production in Libya has been erratic in recent years because of political upheaval there. Production in Iran, once OPEC's second largest exporter, has been depressed in recent years because of Western sanctions. Those sanctions could be eased if current talks over Iran's nuclear program make progress.
"I see a lot of supply out there," Tillerson said.
Exxon will be adding to that in the coming years, despite the low prices.
Exxon told investors Wednesday that 16 new production projects will begin producing oil and gas through 2017, helping the company increase production to 4.3 million barrels per day, up from 4 million barrels per day last year.
The company said it expects to spend less to develop new projects over the next three years, but mainly because prices that its suppliers charge have fallen considerably with the price of oil — not because it is cutting back exploring for oil and gas.