McKinsey Energy Insights has released its latest Global Oil Supply and Demand Outlook predicting that oil prices will range within $60–70/bbl over the next three years.
That is if the market trades ad MEI expects, in which case oil prices would increase to $65-75 by 2030.
In the shorter term, MEI said that subject to OPEC continuing to fulfil its share of production cuts, having achieved 90% of its target in January, then the rebalancing process was likely to proceed relatively smoothly over the coming months.
Good growth is anticipated in North America’s light tight oil production, but lack of upstream investment would accelerate legacy declines and help reduce oil oversupply. In the near term, however, the excess inventory in the market will create increased price volatility.
On the demand side MEI said slower global growth in GDP of 2.5–2.7% per annum, in tandem with oil intensity as a result of improved energy efficiency and alternative fuels would drive a structural deceleration.
However, on the supply side a decline in legacy production, the cost of new production, light tight oil and OPEC production will all have an impact towards a faster than usual global decline rate, with new production becoming more economical as a result of cost cutting strategies during the downturn.
MEI estimates 35 MMb/d of new crude production will need to be met by unsanctioned projects by 2030, which would require $1.6 trillion cumulative capital investment over the next five years.
