Despite rebounding from 12-year lows, lower oil prices have taken their toll on U.S. oil and gas companies -- and former BP (NYSE:BP) CEO Lord John Browne says in order to see a bottom in supply, we will have to see more companies go out of business.
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“We are definitely seeing that at the moment. There will be more of those [bankruptcies] as the credit season rolls forward,” he said during an interview with the FOX Business Network’s Maria Bartiromo.
While supply is strong in the rest of the world, he sees a softening in the U.S. and parts of the North Sea and China.
“There’s still a lot of oil around and it will be produced. Russia’s doing pretty well because the cost base in Russia has come down as a result of the ruble softening, so margins are still staying there, and around the world there are plenty of supplies. There are some indications of people investing less, certainly they are investing less for the long term, but the long-term will take a few years to come and be evident in reduced production.”
In spite of weak China economic data, Browne said the impact of their slowdown on oil is ‘overrated.’
“Clearly they are experiencing a slowdown but actually their oil consumption growth rate is hardly changed. They are still consuming oil because of its transportation primarily and that’s still needed, it’s a staple for the economy,” he said.
He also discussed China’s impact on the rest of the world.
“It’s [global economy] clearly changing. It’s the makeup of the economy that is changing obviously. Six and half to seven percent is the stated new growth rate, it is still pretty good… and it can’t patch over the cracks that the rest of the world have by having a super-fast growth rate.”