Crude oil prices have plummeted 20 percent over the past three months, but the CEO of Europe's biggest oil company Royal Dutch Shell, Peter Voser, doesn’t think global demand is “collapsing.” He, however, expects further downside in oil prices in the second-half of the year as the market is well supplied.
“Demand is quite clearly softening, but I wouldn’t say it’s collapsing. Today the market has enough oil, more oil than we need…I see (oil prices) softening in the second-half,” Voser told CNBC on the sidelines of the World Gas Conference in Kuala Lumpur on Tuesday.
London-traded Brent crude and U.S. WTI (West Texas Intermediate) crude have been in a sharp downtrend in recent months due to worries over the euro zone debt crisis and a Greek exit, as well as a slowdown in growth momentum in top consumers U.S. and China.
Voser, however, says he is not worried about the longer-term demand picture for oil: “We have seen this (fall in demand) in the past, in 2008, 2009, but it can recover quite quickly.”
While oil contributes to around 80 percent of the group’s profits, Shell is making a big push into the LNG (liquefied natural gas) space, betting on robust demand from Asia-Pacific.
Voser says for the first time, in 2012, Shell will produce more natural gas than oil.
Unlike in the U.S., LNG prices in Asia have been rising on continued elevated demand from Japan as it seeks to replace lost power capacity following the shutdown of its nuclear reactors after the 2011 earthquake and tsunami.
“Thailand is now importing LNG, we know that the Philippines, Vietnam, Indonesia, Malaysia are thinking importing as well. We are adding more countries to the overall LNG mix in the region and that will drive demand.”
“Wherever you have free capacity of LNG at the moment you can bring it into this region,” he added.
Shell has 8 million tons per annum (mtpa) of LNG under construction in Australia, and has some 15 mtpa of new LNG capacity under study globally.