Oil markets look more balancedthan at any time in the past 5-years, suggesting prices will most likely move sideways. 2022 is seen -0.3Mbpd under-supplied. There is also an equal one-third chance of a surprise to both the upside and the downside, per our Monte Carlo analysis. Maintaining balance to 2025 is also possible, as long as prices can support +1.6Mbpd pa of shale growth. But generally we expect greater under-supply ahead in other commodities linked to the energy transition.
The full modelling behind this 4-page note is available here.
We are raising our medium-term oil demand forecasts by 2.5-3.0 Mbpd to reflect the growing reality of autonomous vehicles. AVs eventually improve fuel economy in cars and trucks by 15-35%, and displace 1.2 Mbpd of air travel. But their convenience also increases total travel demand. This 20-page note outlines the opportunity and leading companies.
This Excel model calculates long-run oil demand to 2050, end-use by end-use, year-by-year, region-by-region; across the US, the OECD and the non-OECD. Underlying workings are shown in seven subsequent tabs. The model has been updated in Mar-2021 to reflect COVID and autonomous vehicles.
The model runs off 25 input variables, such as GDP growth, electric vehicle penetration and oil-to-gas switching. You can flex these input assumptions, in order to run your own scenarios.
Our scenarioforesees a plateau at c103Mbpd in the 2020s, followed by a gradual decline to below 90Mbpd in 2050. This reflects 7 major technology themes, assessed in depth, in our recent deep-dive report and COVID considerations, assessed in depth in a further deep-dive report.
Without delivering these technology themes, demand would most likely keep growing to 130Mbpd by 2050, due to global population growth and greater economic development in the emerging world. Our pre-COVID model is also included as a separate file for reference.
This data-file provides an overview of the 3.5Mbpd global biofuels industry, across its main components: corn ethanol, sugarcane ethanol, vegetable oils, palm oil, waste oils (renewable diesel), cellulosic biomass, algal biofuels, biogas and landfill gas.
For each biofuel technology, we describe the production process, advantages and drawbacks; plus we quantify the market size, typical costs, CO2 intensities and yields per acre.
While biofuels can be lower carbonthan fossil fuels, they are not zero-carbon, hence continued progress is needed to improve both their economics and their process-efficiencies.
Our long-term estimateis that the total biofuels market could reach 20Mboed (chart below), however this would require another 100M of land and oil prices would need to rise to $125/bbl to justify this switch.
The data-file also contains an overviewof sustainable aviation fuels, summarizing the opportunity set, then estimating the costs and CO2 intensities of different options.
Devastating under-suppliesof 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.
This 4-page notecontains our key charts and conclusions on the oil outlook. For transparency, the data-files and models behind our outlook can be downloaded here.
This model contains our live, basin-by-basin shale forecasts. It covers the Permian, Bakken and Eagle Ford, as a function of the rig count, drilling productivity, completion rates, well productivity and type curves. Thus, we derive production and financial expectations.
For 2022, the key challenge is stepping up activity levels, as the rig count must rise +60% YoY to keep early-2020s oil markets sufficiently supplied. Conversely, in 2021, production surpassed our expectations due to an unprecedented rate of DUC drawdowns, while well productivity was also stronger-than-feared.
Our longer-term numbers hinge on the productivity gainsdescribed in our thematic research. Shale productivity trebled from 2012-2018. We think it can rise another 45% by 2025, unlocking 15Mbpd of liquid shale production. However productivity could disappoint mildly in 2022 as the industry ramps activity levels back post-COVID.
We have also modeled the Marcellus shale gas play, using the same framework, in a further tab of the data-file. Amazingly, there is potential to underpin a 100-200MTpa US LNG expansion here, with 20-50 additional rigs.
We have produced a cross-plot of the costs and CO2 intensities of different fuels, in $/boe and kg of CO2 per boe, to compre the relative attractiveness of decarbonization options.
Includedin the file are different oil products, gas markers, coal, wood, nuclear, biofuels, methanol, hydrogen, CO2-EOR products and the US electricity grid for comparison.
This data-file simply containsthe numbers behind the cross-plot shown above, for anyone looking to interrogate the data or re-format the chart. The workings behind each number are linked in other data-files.
This data-file captures the economics of CO2-enhanced oil recovery, which can lower the total CO2 intensity across the oil industry by 50-100%.
We calculate 10% IRRsare attainable under our base case assumptions at $50/bbl oil prices and $20/ton CO2 prices, however the economics are sensitive to field-by-field variables.
The data-file includes a full cost build-up, segmented across over 20 cost lines (capex in $M/kboed and opex in $/boe), as derived from past project parameters (charts above), plus half a dozen detailed papers from the technical literature, which are also summarized in the file.
Oil prices must entrench well above $50/bbl for 2023-25 oil markets to balance. But prices could materially overshoot. This short 4-page note presents our latest conclusions, and top charts on oil supply-demand, including our outlook to 2025.
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