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Analysts promised oil shortages, but they were wrong

Fig. 1

However, today the market is forecasting for several more years, and in the third year OPEC cannot abandon production restraint measures aimed at reducing supply surplus.

“We live in many ages. And the supply crisis is not visible in the horizon, ”notes Citigroup Inc. Ed Morse, Head of Product Research. New York.

Forecasts have not come true

The biggest collapse of the oil market over the past 25 years, which took place earlier this decade, has forced companies to cut costs significantly. This has led to many warnings that supply growth will not change with increasing demand and will not be able to compensate for the decline in production in the areas of aging.

According to the IEA, between 2014 and 2016, investments in the oil and gas sector fell by USD 350 billion, or more than 40% (the sharpest decline since the 1980s) after prices collapsed from levels above $ 120, and fell under the sign. $ 30. The number of new projects approved in 2017 is at least the last 70 years.


In November 2015, the IEA warned that an increase in supply outside OPEC could end by 2020. Three months later the agency started anxiety – the crisis is coming! Total Patrick Puianne, President and CEO of France, forecast a deficit of 10 million barrels a day, equivalent to that produced by Saudi Arabia. Concerns about the crisis were shared by almost all industry players, from Royal Dutch Shell Plc's leading managers to well-known oil trader Andy Hall.

However, because of the shortage, the world faced abundance. This year, according to many estimates, America will produce about 12 million barrels per day – it was predicted that the country will reach this level no earlier than 2042. Russia has produced record highs, and Iraq is close to historical heights. In Brazil, the most active growth rates are expected in the last 15 years.

According to Bank of America Corp., three-quarters of the shale projects will be profitable within five years, even if the oil price is $ 40 per barrel.

Against this background, Brent crude oil fell to around US $ 60 after a short jump of 4 years above $ 86 in October, when market participants feared Trump's sanctions against Iran.

Dangers go away

At the beginning of the next decade, the event requires 10 million barrels a day, but investment in the industry without shale is not enough to ensure this, said IEA head Fatih Birol at a recent forum in Davos. Meanwhile, OPEC producers are not tired of reiterating that their current policy is to promote investment to prevent a supply crisis.

Yes, the risks that the market places in the form of American sanctions against Venezuela and Iran have not disappeared anywhere. However, with the increase of the United States shale deposit activity, as well as the reduction of large manufacturers' costs through new technologies, there is no risk.

Recently, the shale boom has signaled a slowdown, but according to the American government's forecasts, the next decade will continue to produce new records and turn the country that was once dependent on imports to an competitor with OPEC countries. According to Rystad Energy AS forecasts, countries will produce more oil by 2025 than Russia and Saudi Arabia.

Slate is the story of the triumph of technology, and there are signs that this trend will continue. As history shows, this process is no longer inverted. Perhaps at some point the pace will slow down, but the trend will not change, ”Paul Steven warned from the Chatham House City Council in London.

Saving Art

But the explanation is not limited to slate. The collapse of the oil forced the company to tighten its belts, increase their efficiency and change the overall cost of production model in the industry. In other words, by reducing costs, they learned to continue mining at much lower prices.

For this reason, mining costs in the Gulf of Mexico and Brazil fell by 50% – companies used pre-built infrastructure combined with new technologies, said Morse from Citigroup.

The Norwegian Equinor ASA has reduced the equilibrium price in the new project portfolio to $ 21 per barrel. For comparison: in 2013 this level was about $ 70. Last year, BP Plc began producing oil in the Gulf of Mexico, saving 15% of its budget spending, and is now working on expanding the Mad Dog project, the cost of which is more than doubled.

Deflation of costs

'The opinion on ineligible expenditure is based on a cost structure assessment. Costs continue to decline, not rising and everywhere, ”emphasized Morse.

In addition, there are even signs of cost recovery, suggesting a more active increase in production. According to Birol, this year the capital investment in the shale industry will grow by 20%.

“Although there are no signs of oil shortages. And those who expect higher prices in the future, such as OPEC or Saudi Arabia, still believe that there will be a shortage of supplies over three years, ”said Amy Myers Jaffe, researcher at the External Relations Council on the new affairs. York

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