Oil markets: finding the balance?

Our oil price outlook is informed by a 45-line supply-demand model, running month-by-month out to 2025. This download contains both the model, and a 4-page summary of our outlook.

Devastating under-supplies of oil look less likely on our latest numbers. For 2021, our prior outlook for -3Mbpd under-supply softens to -0.6Mbpd due to lower demand and stronger recent US/Canada output. Out to 2025, $60-70/bbl oil should suffice to balance oil markets, while higher prices could draw in 3Mbpd more shale and 1Mbpd more Saudi oil, plus a buffer of 500Mbbls undrawn excess inventories from the COVID crisis.

After ten years forecasting oil markets, our humble conclusion is that all oil models are wrong. Some are nevertheless useful. To be most useful, our model takes a Monte Carlo approach to the key uncertainties, to quantify the “risk” of positive and negative surprises (illustrative example below).

Please download the model to see, and to flex our input assumptions in 1Q21. Included with the download is a PDF summary of our latest oil price thesis,  which is also available separately, linked here.