Despite recent declines in oil prices due to concerns over global oversupply, Total SA (TTE.US) CEO Patrick Pouyanne remains optimistic, asserting that rising demand will ultimately stabilize the market.
Oil prices are projected to decline this year and next as supply—bolstered by OPEC and non-member producers in the Americas—outpaces demand. On Tuesday, Brent crude, the global benchmark, fell below $60 per barrel for the first time since May, while WTI crude hovered near its lowest levels since 2021.
However, Pouyanne anticipates market stabilization as U.S. and OPEC producers work to avoid exacerbating the surplus and consumption rises. "Demand continues to grow, and I trust OPEC nations will manage production responsibly," he stated during an interview in Paris. He added that U.S. shale producers would likely cut output if prices drop "too low."
Pouyanne’s outlook contrasts with prevailing market weakness. Earlier on Tuesday, Middle Eastern crude entered a contango structure—where near-term contracts trade below longer-dated ones—a sign of oversupply. Similar pricing emerged in parts of the U.S. Gulf Coast market. Weak demand is evident in shrinking fuel premiums for gasoline and diesel, signaling slower consumption.
Yet Pouyanne emphasized a longer-term perspective. Total SA slashed spending earlier this year to adapt to low prices, but its CEO expressed confidence in a rebound, citing underinvestment in new oil projects.
**Bearish on LNG** Pouyanne struck a more pessimistic tone on natural gas, warning that prices could fall by 2027 as new liquefied natural gas (LNG) projects in Qatar and the U.S. come online. European gas prices recently lingered near spring 2024 lows, pressured by mild weather, ample supply, and renewed U.S.-led peace efforts in Ukraine. Even the EU’s planned 2027 ban on Russian LNG imports has not disrupted price stability. Analysts predict a global LNG glut by then.
Total SA aims to mitigate the impact of falling gas prices by reducing spot market exposure and securing long-term contracts with Asian buyers. The company is also reviving its Mozambique LNG project, idled for four years due to local attacks, with production targeted for late 2028 or early 2029. Additionally, it seeks U.S. gas assets to reinforce its position as Europe’s top LNG supplier.
**Shifting Focus from Russia to the U.S.** Total SA has scaled back Russian operations while expanding in the U.S. It retains ties to Russia through stakes in gas producer Novatek and two LNG plants but recorded a $14.8 billion impairment in 2022 due to the Ukraine war. The company also co-owns the Dutch Zeeland refinery with Russia’s Lukoil PJSC, which faces U.S. sanctions. Pouyanne confirmed Total SA’s agreement to operate the refinery independently and may acquire Lukoil’s 45% stake if the Russian firm divests internationally.
He cautioned that even if Russia-Ukraine peace talks succeed, sustained stability would take time, delaying reinvestment in the region. Meanwhile, Total SA has greenlit a $1 billion Texas solar project to power a major tech firm, underscoring its U.S. pivot. "We’ve moved from Russia to the U.S., and that’s where we’ll stay," Pouyanne said.
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