As oil prices fell below $60, the CEO of Total (TTE.US) “bucked the trend” and spoke out: the market will eventually stabilize with demand support

According to the Zhitong Finance App, Total (TTE.US) CEO Patrick Pouyanne said that although oil prices fell this week due to heightened concerns about global oil surpluses, rising oil demand will help support oil prices. Due to increased production from OPEC and many non-member countries in the Americas, oil supply is expected to exceed demand this year and next, so oil prices are expected to fall every year. On Tuesday, the global benchmark Brent crude fell below $60 per barrel for the first time since May. WTI crude oil is trading close to its lowest level since 2021.

However, Pouyanne expects the market to stabilize as the US and OPEC oil producers work to avoid increasing oversupply and rising consumption. “Demand continues to grow,” Pouyanne said in an interview in Paris on Tuesday. I also believe that OPEC countries can properly manage production.” He added that if oil prices are “too low,” US shale oil producers will cut production.

Pouyanne's views are in stark contrast to the current signs of weakness commonly seen in the oil market. Earlier on Tuesday, Middle Eastern crude oil prices entered a downward pattern known as “futures premium” (contango), where contract prices for recent deliveries were lower than contract prices for forward deliveries. This phenomenon usually indicates oversupply. The same pricing structure has also appeared in some crude oil markets along the US Gulf Coast. Demand appears to be very weak, and falling fuel premiums such as gasoline and diesel indicate a slowdown in consumption.

However, Pouyanne pointed out that market recovery requires a longer-term perspective. The French energy giant decided to cut spending earlier this year to accommodate low oil prices, and its CEO said he is confident that crude oil prices will rebound because the industry is underinvesting in new projects.

Downplaying the prospects of liquefied natural gas

Meanwhile, Pouyanne is more pessimistic about the future of the gas market. He said gas prices are likely to fall in 2027 as a number of new liquefied natural gas projects in Qatar and the US are about to be put into operation.

Driven by mild weather, adequate supply, and US efforts to restart Russian-Ukrainian peace mediation, European gas prices have recently hovered near their lowest level since the spring of 2024. Even though the EU plans to completely ban Russian liquefied natural gas imports from January 2027, gas prices remain stable. The global supply of liquefied natural gas is sufficient, so the analysis predicts that when the EU ban on Russia's supply takes effect, there will be a global surplus of liquefied natural gas.

Pouyanne said his company should be able to mitigate the impact of falling gas prices after reducing risk exposure to the spot market and increasing long-term contracts with Asian buyers.

Total is redeploying workers and contractors at its liquefied natural gas project in Mozambique after being shut down for four years due to local attacks. The company said it plans to start production in late 2028 or early 2029. Additionally, the company is still seeking to acquire US natural gas production assets to solidify its position as America's largest exporter of LNG to Europe.

The French company has been strengthening its operations in the US in recent years while reducing its operations in Russia. The company still maintains ties with Russia by holding shares in gas producer Novatek and two LNG plants in Russia. In 2022, due to the Russian-Ukrainian war, the company calculated $14.8 billion in impairment preparations and provisions for these assets.

Total is also entering the Russian market through its Dutch refinery in Zeeland, which it co-owns with Russia's Lukoil PJSC (Lukoil PJSC). The Russian oil company is facing US sanctions, and the US Treasury is negotiating with allies from Europe to the Middle East, while also struggling to deal with the complex divestment of Lukoil's overseas business.

Pouyanne said that Total has reached an agreement with Lukoil under which the French company can fully operate the Zeeland refinery. He also said that if LUKOIL eventually sells all of its international operations, Total will consider whether to exercise its right to acquire 45% of LUKOIL's shares in the Dutch refinery.

Pouyanne said that even if peace is achieved between Russia and Ukraine, it will take time to see if continued stability can be maintained, which means the company will not “immediately” rush to resume investment in the region.

Pouyanne also revealed that the company has approved a $1 billion investment in a solar project in Texas to power a leading technology company, but he did not reveal the name of the company. He said, “Today we have switched from Russia to the US, and this situation will continue.”