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Page added on May 5, 2020
Is An Oil Supply Shortage Inevitable?
Oil prices are rising as supply shut ins mount and oil demand seems to be turning a corner. Some oil market analysts even warn that a supply deficit could be on the horizon, one that could balloon in the coming years because of the damage done today.
Demand remains sharply down, but April is widely considered the nadir, even if consumption remains depressed for months to come. Several European countries, along with a number of U.S. states, are easing stay-at-home orders. “While there is still some doubt surrounding the production trends, the market already appears convinced – amid growing economic optimism – that demand and prices will recover rapidly,” Commerzbank wrote in a note on Tuesday.
The supply shut ins will be severe. “Current activity levels in US shale are now so low that the declines will become precipitous without a rebound in completions,” Standard Chartered wrote in a note. The bank sees shale output falling by 2.74 million barrels per day (mb/d) by the end of the year.
But the losses won’t just come from U.S. shale. Worldwide conventional production, which makes up the bulk of total global supply, will also suffer from low prices, deferred maintenance, and shut ins.
The dramatic decline in global oil production, some of which may be permanent, could sow the seeds for the next upcycle. “Lower activity and gradual normalization of demand should drive a more favorable 2021,” Goldman Sachs wrote in a note. The investment bank sees oil prices rallying to $65 per barrel by the end of next year.
Beyond that, some analysts see an even bigger supply/demand mismatch. “Even though the world is currently facing what is arguably the largest oil glut ever recorded, the tables will turn dramatically in coming years,” Rystad Energy said in a report. “The lack of activity and investments currently planned by cost-conscious E&P firms, combined with an inevitable rebound in global oil demand, is set to cause a supply deficit of around 5 million barrels per day (bpd) in 2025.”
Rystad says it sees Brent rising to about $68 per barrel by 2025, but may need to go higher due to the prospect of a supply shortfall.
However, expectations of such a supply shortfall hinge very heavily on a rebound in demand. Rystad said its base case for oil demand is growth to 105 mb/d by 2025, which would require growth of another 5 mb/d in demand over the next five years.
There are numerous reasons why that might be overly optimistic. Given the unfolding recession and a possible great depression, it will take time simply to repair what has been lost in the last few months. Even if governments manage to rescue savaged economies, the lasting scars on aviation and driving, as well as an increase of telework, could prevent a full rebound of oil demand. Combine that with ongoing progress in EVs, and you have a toxic cocktail for oil demand growth.
Even some oil executives are beginning to fear peak demand. “We are looking at a major demand destruction that we don’t even know that will come back. So the oil price may come back. But if the volumes are significantly lower, we still have a major dislocation, of course, in our own cash wheel,” Royal Dutch Shell’s CEO van Beurden said.
But Rystad Energy is not the only one predicting a supply shortfall and sharp price rebound. Standard Chartered pointed to the flat futures curve, which it says is too flat at the back end. “We think the market is underestimating the extent of permanent supply damage,” Standard Chartered said. The bank said that longer-dated prices need to rise in order to head off the supply shortage.
By Nick Cunningham of Oilprice.com
25 Comments on "Is An Oil Supply Shortage Inevitable?"
I AM THE MOB on Wed, 6th May 2020 6:10 am
After the US peaked in oil production. Nixon came up with a plan. Called the ‘Kissinger Report”.
And now that plan is going into action.
Cloggie on Wed, 6th May 2020 7:28 am
The battolyser, a competitor for the old-school electrolyser:
https://deepresource.wordpress.com/2020/05/06/battolyser-or-edison-battery-or-nickel-iron-battery/
peaceful day 12 on Wed, 6th May 2020 7:35 am
peaceful boom: 56
went to see allah the pedilfer: 219
Abraham van Helsing on Wed, 6th May 2020 9:32 am
The end of hyper-globalisation: Germany is bringing back industries from China and increases use robots:
https://www.spiegel.de/wirtschaft/soziales/corona-wie-die-pandemie-zur-renaissance-der-deutschen-industrie-fuehrt-a-82d65db2-d12b-4879-b25b-cf1e8a206bf7
Megatrend: the cheap Chinese worker is being replaced by the even cheaper German robot. This trend started with the mortgage crisis of 2008. Corona merely amplifies.
Duncan Idaho on Wed, 6th May 2020 10:06 am
1935 — US: WPA is established in Beloved & Respected Comrade Leader FDR’s New Deal; the state becomes make-work employer.
The Fat Boy should take note—-
Duncan Idaho on Wed, 6th May 2020 10:12 am
1970 —
Between today & about the 20th, student strikes disrupt 448 colleges, involving 1 million+ students (possibly as many as “4 million students”; Todd Gitlin believes 750+ campuses [of 2,500 nationwide], with demonstrations at 1200+ demonstrations against sending troops to Cambodia); Stanford University experiences “worst riots in its history.”
75 campuses remain closed thru rest of the school year.
supremacist muzzies peaceful day 13 59 booms 224 went to see muhadmad the pedifiler on Wed, 6th May 2020 11:48 am
peaceful supremacist muzzies deep thought
why are pigs called smart and shouldn’t be slaughtered. Muzzies believe pork shouldn’t be consumed either. Isn’t it about muzzie lovin intended or otherwise?
If intelligence is determining factors, why are muzzies killing non muzzies when clearly they’re more intelligent than pigs?
Why is “Royal” Institution lovin muzzies and produced a crap model? then the guy broke quarantine to boink his poly gf?
Some deep thoughts
supremacist muzzies peaceful day 13 59 booms 224 went to see muhadmad the pedifiler on Wed, 6th May 2020 11:55 am
deep thoughts
should whitey supertard scientific supremacist “thunderf00t” be amputated for muzzie lovin?
the moment he went on self quarantine i said it smellz.
why are whitey supertard rationalists getting it so wrong permitted to pollute the intardweb that (((supertard))) created? shouldn’t there be a chip implant to shock them out of deep thoughts
or at least a license to think as first step?
if those faulty rationality caused so much damages are permitted to smear (((supremetard))) then shouldn’t the practicioner be called to account?
I’m a thinker and this would suck but bart simpson strategy should be debated here. If bart doesn’t get his way, everyone else is also ruined
Cloggie on Wed, 6th May 2020 2:31 pm
There are many renewable energy skeptics who claim that a renewable energy base won’t work, because, you see, renewable energy is an extension of fossil fuel. Vattenfal-Nederland showed that it is already possible to produce a child’s crib and mattress, entirely without fossil fuel. Paint from potatoes, transport by sail boat and e-vehicle, all machines are electric, steel produced with electricity. The cloth for the mattress is still made by hand. Vattenfall has the slogan “fossil-free within one generation”. And the first think the next generation will need is a crib.
https://deepresource.wordpress.com/2020/05/06/how-to-manufacture-a-crib-entirely-fossil-free/
the learned elders of muzzie lovin on Wed, 6th May 2020 3:25 pm
how can we disadvantage whitey supertards scientific supremacists such as supertard “thunderf00t”. We call for amputation.
for crime of muzzie lovin and for the gigantic blunder of locking down due to muzzie love virus. we rile up americans worldwide and people in bostwana. once we have the political will we will effectively silent thinking whitey supertard scientific supremacists.
right now there’s madated vaccination. we can demand thinking whitey supremtard scientific supremacist to have brain implant. once a thought lasts more than a second, a slight current is emitted to disrupt the thought.
or we sell license to think.
either way, whitey supertard scientific supremacists are unable to self police then the grub will police thoughts.
we (((suprertard))) soros media will run the muzzielovering virus for decades and encourage whitey supertard such as conservative *cough* greg abbott of texas to arrest armed citizens and lockdowns.
this is the plan. politically we’ll bargain for abandoning usage of high english for muzzies lovin, or total amputation of all muzzies starting with muzzie imams
Harquebus on Wed, 6th May 2020 6:40 pm
Currency creation has reached its effective limits. Demand will not return to previous levels.
I have often stated on this forum that, peak oil was circa 2005 and the intervening years have used currency creation to produce shale oil which, is not really oil in the traditional sense because, diesel and jet fuel can not produced from it.
Resource depletion, increasing pollution and population growth have brought us to this point and the inevitable thinning of the herd. Plagues always end the same way.
Duncan Idaho on Wed, 6th May 2020 6:44 pm
kakistocracy (plural kakistocracies)
Government under the control of a nation’s worst or least-qualified citizens.
Abraham van Helsing on Thu, 7th May 2020 1:56 am
https://tass.com/economy/1104459
“Nord Stream 2 to be commissioned by the end of 2020”
https://www.reuters.com/article/us-usa-russia-nord-stream-vessel/pipe-laying-vessel-reaches-baltic-as-russias-nord-stream-2-target-looms-idUSKBN22F0LH
“Pipe-laying vessel reaches Baltic as Russia’s Nord Stream 2 target looms”
Trump tried to sabotage Europe’s energy supply, probably in vain. Yet Europe and Russia need to pay attention for further acts of sabotage and prepared to hit back.
#AmazonMicrosoftAppleGoogle
Abraham van Helsing on Thu, 7th May 2020 3:30 am
Solar panel fence:
https://pbs.twimg.com/media/ED3cAG-XkAAVjib?format=jpg&name=900×900
Solar panels have become so cheap that ever more people contemplate using them as a garden fence.
Disadvantage: 30% less yield compared to optimal orientation
Advantages:
– they occupy no useful garden place
– more yield in the winter, the time you need electricity most
– no need to build scaffold for roof mounting, you can mount them yourself
– you save on fence cost (panel = fence)
After 4.5 years being an owner of panels on the roof (almost optimal placed) I can confirm that the earn-back time is indeed 8.5 years (against 2015 prices). If you use panels as a fence, you have to calculate 11 years instead. And still have 20 or (much) more years electricity for free. And a fence.
Davy on Thu, 7th May 2020 5:01 am
“Solar panels have become so cheap that ever more people contemplate using them as a garden fence.”
More fake green use of scare planetary resources. The whole renewable field needs to be rethought away from too cheap to meter to the reality of all the damage done in the process of manufacture, placement, and disposal. Since fossil fuels are worse then behavioral changes are the only option.
“After 4.5 years being an owner of panels on the roof (almost optimal placed) I can confirm that the earn-back time is indeed 8.5 years ”
Yea, your grid tie with gov subsidies I am sure is the reason for quick payback. If you have batteries and inverter the time is much more especially in a location like Holland or Missouri where solar has issues with weather. I am lucky to gather on average 10kwh a day. Another issue in Missouri is the low cost of electricity at $.11 kwh. So 10x.11=11x30days=$33 is the savings in electricity an average month. My system cost was roughly $20K. Payback is 50 years.
Cloggie on Thu, 7th May 2020 7:07 am
“More fake green use of scare planetary resources.”
Why fake?
“The whole renewable field needs to be rethought away from too cheap to meter to the reality of all the damage done in the process of manufacture, placement, and disposal. Since fossil fuels are worse then behavioral changes are the only option.”
But you are not going to do the rethinking, right, other than proposing living without any energy whatsoever, since we are not allowed to use either fossil or renewable.lol
You’re one big nothingburger.
Here more ideas for use of solar in the garden:
https://deepresource.wordpress.com/2020/05/07/solar-panels-as-garden-fence/
Just calculated that Dutch garden terraces alone are 300 million m2, representing a potential of 54 GWp or 5.4 GW continuous 365/7/24 or 41% of the average Dutch electricity consumption. This seems to be a much better alternative than Solaroad, because the load on the panels surface is much less.
Mick on Thu, 7th May 2020 7:20 am
Omg Cloggie is a fucking clueless moron just by going on that last post .
Cloggie on Thu, 7th May 2020 7:21 am
“Yea, your grid tie with gov subsidies I am sure is the reason for quick payback. If you have batteries and inverter the time is much more especially in a location like Holland or Missouri where solar has issues with weather. I am lucky to gather on average 10kwh a day. Another issue in Missouri is the low cost of electricity at $.11 kwh. So 10x.11=11x30days=$33 is the savings in electricity an average month. My system cost was roughly $20K. Payback is 50 years.”
Indeed. In Holland a kWh from the grid costs 23 cent. Every kWh from the panels I feed back in the grid brings me 23 cents (from the grid, not gov.). Hence the 8.5 years.
Note these are panels from 2015, with a price tag of 300 euro. Today they cost merely 100 euro. All-in price 6 panels 2015: 3000,- sharp. My solar dashboard today tells me I have earned back 1500,- euro, in 4.5 years. But that half year was winter, so the overall payback time is less than 9 years, more like 8.5 year.
Yesterday and today (very sunny) the yield is 10 kWh. Record yield 11-12 kWh. Average yearly yield 1600 kWh or 4.4 kWh/day. With that I’m 100 kWh short, which the grid gladly delivers.
Load: freezer, fridge, TV, computers, lights, cooking, wifi, central heating pump, air-cleaners, washing machine, no airco, etc. Just average.
No batteries, will wait for the prices to come down AND when after 2023 the compensation from the grid will be less royal.
Here a pointer that for 3150,- in 2020 in Holland you can get a solar installation of 9 in stead of my 6 panels:
https://www.zonnepaneelprijzen.nl/kosten/
Price inverter, cabling, installation have not come down, only price panels.
Cloggie on Thu, 7th May 2020 7:22 am
“mg Cloggie is a fucking clueless moron just by going on that last post.”
Try for once not to be a clueless, 2nd hand European and MOTIVATE your name-calling.
I bet you can’t, too dumbed down.
Cloggie on Thu, 7th May 2020 7:47 am
In Germany they have a backlog of 10 GW onshore wind. Reason stalling: legal, not financial:
https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/072219-german-wind-delays-caused-by-aviation-military-nature-concerns
– 4.8 GW projects blocked by civil aviation concerns
– 3.6 GW stuck due to military restrictions: survey
– 1 GW delayed by appeals, mainly by nature groups
Less NIMBYs than I thought, mostly military and civil aviation.
A lot of offshore wind will come online after 2025.
I AM THE MOB on Thu, 7th May 2020 8:04 am
Cuomo says it’s ‘shocking’ most (66%) coronavirus hospitalizations are people who had been following the lockdown
https://www.cnbc.com/2020/05/06/ny-gov-cuomo-says-its-shocking-most-new-coronavirus-hospitalizations-are-people-staying-home.html
Killing the patient to cure it.
Cloggie on Thu, 7th May 2020 9:44 am
Turning the garden terrace into an renewable energy terrace:
https://deepresource.wordpress.com/2020/05/07/solaroad-or-solar-garden-terrace/
“Solaroad or Solar Garden Terrace?”
Abraham van Helsing on Fri, 8th May 2020 10:08 am
That was quick!
Akademik Cherskiy is underway from Kaliningrad to Sassnitz-Ruegen-Germany:
https://www.marinetraffic.com/en/ais/details/ships/shipid:899194/mmsi:273399760/imo:8770261/vessel:AKADEMIK_CHERSKIY
One wonders what is so great about Sassnitz!!?
https://c8.alamy.com/comp/DAD813/a-stock-of-pipes-is-seen-on-the-premises-of-the-ferry-port-sassnitz-DAD813.jpg
(I was there on holiday last year and saw these with my own eyes)
Harquebus on Fri, 8th May 2020 3:57 pm
Cloggie
Using economic analyses to justify the viability of ‘renewable energy’ devices is the wrong methodology.
EROEI mate, EROEI.
Cloggie on Sat, 9th May 2020 2:30 am
“EROEI mate, EROEI.”
What about it?