'Extreme volatility' to hit oil market, says BP CEO

Oil prices face “extreme volatility” amid the continued uncertainty surrounding Iran’s oil industry ahead of fresh US sanctions, according to BP chief executive Bob Dudley.

Dudley told CNBC that prices could spike or plummet over the run-up to, and immediate aftermath of, US sanctions which come into effect on 4 November, noting that it was hard to predict how much of the country’s production would be affected.

Many of the country’s oil buying customers are fearful of being slapped with secondary sanctions, with Total having pulled out of a large deal in the country over the summer, but BP and Serica Energy were granted exemption to run a North Sea gas field partly owned by Iran.

Some analyst predictions put the number of barrels removed from the market at as high as 1.5m per day, which would likely send prices higher than their current rate, with Brent Crude trading at $84.96 and WTI at $74.92 on Wednesday.

Dudley commented that, even at their current rate, prices for Brent were currently "off the fairway" and problematic for the world economy.

"We're very disciplined in our company, really disciplined with our capital spending and we will continue to be, and not planning on an $80 future. We're planning on a cycle of $60-$65. It's a bit up from the $55 we said last year," said Dudley.

President Donald Trump has requested that OPEC members increase production in order to mitigate any Iranian shortfall and impact on prices.

Saudi Arabia claimed that it has the spare capacity to fulfil any shortfall created by Iran, an assertion that Dudley agreed with but Iran disputed.

"I think Saudi Arabia does have capacity they could bring to the market. But on the other side of it you have very unpredictable circumstances in Venezuela and of course, the Iran sanctions," said Dudley.

"But Dan Yergin (energy expert at IHS Markit) had a great quote saying that actually the markets appear to be in balance, but emotionally they're not stable right now."