Lorenzo Simonelli Talks Oil, Energy Projects
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Oil is holding near a seven-month high as investors await the next round of U.S.-Iran talks on Thursday. Concerns about potential fallout from a U.S. strike on Iran or Iran closing the Strait of Hormuz have helped drive oil higher this year, despite expectations of a global glut. Baker Hughes CEO Lorenzo Simonelli joins us now from Washington, D.C., where he is attending the Transatlantic Gas Security Forum and Energy Aspects Conference. Lorenzo, thanks very much for your time. What do you make, first of all, of the market right now? I mean, prices have been driven higher, but we're still looking at a six handle on NYMEX. And it seems like if there is a conflict in the Middle East, it could go much higher very quickly.
Well, great to be with you. And I think we all know that the aspect of price is very much driven by geopolitics and also what's happening day to day. And it's hard to predict what's going to take place. I think what we look at from a Baker Hughes perspective is the fundamentals. And when we look at the long term, demand is increasing and we're going to need to see the supply come online as we look at the back half of 26 into 27. So it will be range bound. But again, it's going to be driven by other factors than just the demand and supply at this moment. And you're seeing it increase based on the geopolitics situation at the moment.
Well, from a fundamental perspective, it seems like there's an absolute glut of oil on planet Earth. I mean, the supply side seems to be winning out here. Lorenzo, do you see that differently?
I see that being a moment in time and as we said previously, as we look at the 27, 28, we've got strong demand signals and actually 26 will be a year where we trough and we see a recovery in the second half of the year going into 27. You've already got early indications from what we're seeing from our customers in the Middle East in particular relative to rig activation and also the expectation that that supply-demand comes into balance. And I think, again, you've got to look at the fundamentals longer term. And whereas there's maybe oversupply at the moment, you see that coming correction into 27, 28. And the fundamentals with population increasing, energy demand increasing, AI, oil and gas is on the rise, and you're going to need more supply.
How is that balance right now, Lorenzo, specifically with the AI demand? Is it yet outstripping the availability of these new projects to come online and power them, be it renewables or it be some parts of your business that might be used in order to power it?
So at the moment, I think there's a bifurcation. Again, you've got a good supply of oil. If you look at gas, gas is the winner longer term. And as you look at the fundamentals as well, we see gas growing significantly over the course of now and 2040, an increase in natural gas by 20%.
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