‘Oil prices may remain high for quite some time’ – Galp CEO

  • ECO News
  • 20 April 2022

Andy Brown says oil prices may remain high in the coming months. Supply in Portugal is not threatened, but Galp will no longer be able to export because of sanctions on Russia.

“Oil prices may remain high for quite some time,” says Galp CEO, stressing that analysts are pointing to a 12-month period. Andy Brown even says it will be necessary to wait “a year or two before prices fall substantially”.

Andy Brown recalled that, at the end of the year, energy markets were already under great pressure due to the lack of investment in new capacity and maintenance. A scenario that was made worse by the war in Ukraine. “Markets were tight at the end of last year and then we had the war that made the situation even worse,” Brown, who has headed Galp since February of last year, said at a press conference at the company’s headquarters.

He noted Russia is responsible for around half the supply of distillates used to produce diesel. Andy Brown assured that supply in Portugal is not threatened, but that Galp can no longer export until it finds alternatives. “We can satisfy the domestic market but we won’t be able to export if we don’t find an alternative to Russian vacuum diesel,” he said. “Supply for April is assured but May is still open,” he added. The lack of raw material could force a 10% to 15% reduction in production but will not lead to a reduction in jobs, assured the CEO.

More than oil, the company’s CEO is concerned about natural gas prices and their impact on the cost of electricity. Quotations are falling due to the approach of sexier weather, but Andy Brown stressed future contracts are still trading at close to $200. “I don’t want anyone to believe that the crisis in energy is over”.

In recent days, the average price of electricity has fallen as low as €85 per MWh on the Iberian market because of high wind and has reached at certain times of the day 6 MWh because only renewable sources are being used. But this was a one-off situation and the price of gas will again determine the value of electricity.

“Gas and electricity are a more important issue for Portugal and Europe than oil,” pointed out Galp’s CEO, who praised the Iberian agreement to limit the price of gas and thus curb a greater rise in electricity values.